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COESBIGHT DEPOSIT. 



The Way Out 



ECONOMIC, INDUSTRIAL, FINANCIAL 



BY 

A. F. THOMAS 



J. P. BELL COMPANY 

INCORPORATED 

LYNCHBURG, V A. 

MCMXXII 






COPYRIGHTED BY 

A. F. THOMAS 

Lynchburg, Va. 

1922 



®C!.A683241 



\\ 






•vA-O 



CONTENTS. 
CHAP. PAGE 

I. Terms and Principles 7 

II. Land 25 

III. Productive Labor 45 

IV. Capitalism 59 

V. The Division of Production Under Cap- 
italism 86 

VI. Business Co-operation 100 

VII. Labor Co-operation 113 

VIII. The Trend Toward Monopoly 137 

IX. The Individual in Co-operation 152 

X. Monopoly 167 

XI. Currency and Bank Credit 199 

XII. Next Steps 241 



PREFACE. 
An Appeal and a Challenge. 

The history of man presents a succession of funda- 
mental social changes occurring at more or less irregular 
intervals. Each epoch is governed by laws applicable to 
the peculiar conditions and circumstances existing 
during such period. It is no more possible to retain in 
the new period the things that pertained only to the old 
than it is for the man of to-day to transform himself into 
the child of yesterday. 

There are many indications that the world is now on 
the eve of tremendous social change. A new era is being 
born. The result is inevitable. Men have the alterna- 
tives of adjusting themselves to the coming order, or of 
resisting it to their detriment and perhaps to their de- 
struction. The nameless graves of millions bear mute, 
but convincing testimony to the truth of this observation. 

The hope of the world rests upon the assumption that 
men will become wiser and better ; that they will develop 
enough intelligence and character to adjust themselves 
properly to the environment which evolution creates for 
them. 

The dominant purpose of this book is to examine ana- 
lytically the fundamentals of the social order ; to discover 
and make plain the laws of social evolution. It is a 
search for truth in the faith that we shall know the truth 
and that the truth shall make us free. 

Since mankind moves under leadership, it is my 
earnest desire to focus the attention of the leaders among 
all classes upon present problems, so that the combined 
intellectual and moral force of such leaders may be ap- 



plied to the task of devising proper solutions. If the 
blind lead the blind, both will fall into the proverbial 
ditch. The right to lead rests upon the possession of 
superior capacity to see and make plain the better way 
and a willingness to discharge faithfully the duties which 
this better endowment imposes. 

This work is intended both as an appeal and a chal- 
lenge. An appeal to forward looking, progressive citi- 
zens to reexamine the underlying principles of social 
organization and to exert themselves to promote a better 
understanding and a more general acceptance of such 
principles as their judgments may approve. A challenge 
to those of reactionary and conservative tendencies to 
expose and refute the fallacies they may discover and 
thus prevent the acceptance of mistaken conclusions re- 
sulting from them. 

In the treatment of the different subjects I have pur- 
posely avoided reference to any authorities, however 
eminent, because I desired to present the case solely upon 
its merits, leaving the readers to reach such conclusions 
as their unbiased judgments may approve. 

In the preparation of the work I have received from 
many generous friends valuable suggestions and help, 
for which I am deeply grateful. With this general ac- 
knowledgment goes the wish that opportunity may arise 
for me to give to each of these friends more specific evi- 
dence of my appreciation of their kindness. 

A. F. Thomas. 
Lynchburg, Va., 
May, 1922. 



THE WAY OUT, 

ECONOMIC, INDUSTRIAL, FINANCIAL 
BY 

A. F. THOMAS. 
CHAPTER I. 

TERMS AND PRINCIPLES. 

In view of the fact that such terms as Cooperation, 
Collectivism, Communism, Capitalism, Socialism, Indi- 
vidualism and the like have acquired meanings which 
give to them a more or less definitive and in some cases 
a malevolent significance it is necessary in the interest of 
clarity to define with some precision the sense in which 
they are to be used. If it were practicable it might even 
be desirable to coin anew the terms to represent the ideas 
which these terms are intended to convey, but such a 
course seems less practicable than to employ the present 
terms even at the risk of being misunderstood by some 
and misrepresented by others. 

Communism The term Communism and its derivatives 
defined. w ]\\ no ^ ^ e use( j j n ^j g discussion to rep- 

resent the economic theory that there shall be State own- 
ership of all property and that the State shall control all 
means of production and distribution of the products of 
industry. The term will be used to convey only the idea 
of the common ownership of the particular property in- 
volved in an operation for the common benefit in which 
the contribution is made in proportion to ability and the 
distribution is effected according to need. In other 
words, the purpose is to discuss the principle of contribu- 



8 The Way Out 



tion according to strength, and distribution according to 
need as exemplified by such operations as may employ 
this principle with beneficial effects. 

Socialism The term Socialism and its derivatives are 

defined. intended to convey the idea of collective ac- 

tion, the results of which are to be distributed according 
to contribution. 

Individualism. Individualism will be used in a sense en- 
tirely negative of joint action. This prin- 
ciple admits of no organic relation between individuals 
or groups and hence there can be no controlling principle 
of relativity between individuals or classes of society in 
the things in which individualism is supreme. 

Cooperation The proposition to be sustained is that there 
inclusive. j s j n eV ery social organism a proper sphere 

for Communism, Cooperation, Socialism, and Individ- 
ualism, and that the most perfect social organism is that 
which gives each of them its proper place in the scheme 
of general cooperation. 

Growth of As the social body has evolved from its 
Communism. lowest state, Communism has developed in 
consonance with it. The more highly developed society 
becomes, the more extensive the application of the com- 
munistic principle. It may be shocking to many to learn 
that all people are communistic and, as between individ- 
uals, they all agree in principle, differing only in degree. 
Perhaps the earliest communistic organization was the 
family in which the stronger members combined to pro- 
duce, distributing the results of their efforts according 
to the needs of all. It is according to this natural prin- 
ciple that the strong labor in order that they may take 



Terms and Principles 9 

care of the weak. It is a provision of nature to insure 
the welfare of the genus. As social growth proceeds 

with its multiplication of individuals and 
rgamza ion, i ncrease d complexity of relation, necessity, 

the mother of invention, compels organiza- 
tion designed to promote social welfare. Like the social 
body it naturally becomes increasingly complex and its 
functions embrace an ever widening sphere of activity. 

state service In so far as their purposes are to serve the 
communistic, state, all governmental activities are neces- 
sarily communistic. The effort to preserve the peace is 
but another expression of the purpose to protect the weak 
against the imposition of the strong. The establishment 
of a judicial system is designed to furnish means by 
which justice and protection may be afforded those who 
cannot protect themselves. 

The legislative branch of government is charged with 
the duty of laying down the rules of decorous behavior 
and the executive branch of government has the duty of 
administering these laws and may call into play the 
entire force of society to compel obedience to them. The 
court houses, the capitols and their auxiliary buildings 
are constructed and maintained at the public expense. 
The salaries of all public officers, the costs of armies and 
navies are public charges collected from all in proportion 
to the individual ability to pay and the funds so derived, 
theoretically at least, are devoted to the service of those 
who stand in greatest need. The public free school 
system, open as it is to all, is sustained by collections 
ttt, « cj. made and disbursed in the same way. The 

Why the State , ,,. . , . . J 

educates controlling reason in this case is that gen- 

eral education is necessary to the normal 
development of the social body, and that public support 
and operation of it is the most efficient method of accom- 



10 The Way Out 



plishing the desired end. Eleemosynary institutions, 
care of the deaf, dumb, and blind, provision for lunatics, 
penal and reformatory institutions, public health activ- 
ities, public research for the promotion of production and 
many other activities of similar character form the ever 
increasing list of subjects that rest entirely upon the 
communistic principle. 

Socialistic Socialistic action is confined to those cooper- 

cooperation, ative operations designed to produce with 
highest efficiency, distributing the product according to 
the demand of equity based upon the contribution of the 
individual. In other words, the individual under this 
system must receive the equivalent of his contribution. 
All public utilities including the post office, private bus- 
iness and the wage system function on the socialistic 
principle. Public parks, free playgrounds, sewers or 
other facilities for the use of which no charge is made 
are strictly communistic, while water, heat, light and 
other service for which the individual pays in proportion 
to use is in accordance with the principles of socialism. 
Theoretically all socialistic service should be at cost, but 
business and the wage system, under private initiative, 
cannot fully meet this requirement. 

Cooperative It will be observed that both communistic 
production. an( j socialistic operations employ coopera- 
tion in production whether under public or private in- 
itiative, therefore, on the productive side, there is no 
. difference in principle between them. When 

the distribution of benefits begins, commun- 
ism and socialism fall under diverse principles, the first 
having as its object the supplying of needs, the second 
devoted to equitable division between individuals. Com- 



Terms and Principles 11 

Love, munistic distribution finds its raison d'etre 

the basis of j n ^ e emotional nature of man and has love 

communism. ag itg bagig> Qn ^ other hand? socialistic 

action is founded upon reason. Its purpose being to 
Justice, teach a standard of equal justice to all, it 

the basis of demands that each shall receive not what he 
socialistic dis- may need but the equivalent of that which 
tribution. h e contributed to the production. The lan- 

guage of the first is that the injury of one is the hurt of 
all, while the slogan of the other is equal and exact justice 
to all men. Surprising as it may be, the fact remains 
that both communistic and socialistic principles are ex- 
tending their spheres of action in all cooperative opera- 
tions whether conducted under public or private initia- 
tive. Especially is this true of the communistic principle 
Growth of m so called private business. The tremen- 
communism dous growth of welfare work and the in- 
in private creasing assumption of risk of business 

business. evidenced by provision to protect the indi- 

vidual workers and to compensate them in case of acci- 
dent furnish indisputable evidence that the social body 
is functioning at an ever increasing rate in accord with 
this principle. 

It is hardly an exaggeration to say that human life 
completes a circle. It is called into being by cooperation, 
is welcomed and cared for by communism, the strong 
taking care of the weak. In its period of production it 
conforms to cooperation and socialism, and its declining 
years lead back to weakness and communism. Com- 
munism, then, may be said to welcome life's advent with 
smiles and endearments and to soothe its pains of parting 
with loving attention and tears. 

Individualism, or that tendency of the human will to 
think and do that which the intellect determines without 



12 The Way Out 



regard to any other being, has necessarily a sphere that 
is constantly circumscribed and narrowed as civilization 

individualism advances - lt is the ri g ht of private judg- 
limited. ment, the right to choose one's own course, 

to think one's own thoughts and arrive at 
one's own conclusions. This principle in its simplest 
form has its widest application in the case of the lone 
savage wandering in the uninhabited wilderness where 
nothing he may think or do will affect others of his kind. 
As this wanderer emerges from his wilderness and begins 
to enter into contact with others he finds his opportunity 
for applying this principle growing increasingly less. 

individualism It is not intended to say that in any well 
valuable. organized society this principle of individ- 

ualism can or should be eliminated since it is the basis 
upon which individual initiative rests, a valuable help in 
securing the highest results in cooperative effort. It is 
this individual faculty that makes self orientation pos- 
sible, without which it is inconceivable that a marked 
degree of human progress would be possible. 

It will be seen, then, that these principles of socialism, 
communism and individualism find their base in human 
__ nature and are essential parts of human 

composite. organization, and the omission of any of 
them would necessarily impair the efficiency 
of the whole. Manifestly, then, the task before us is not 
to abolish them but to promote the development of a 
higher order of intelligence that will lead to the recogni- 
tion of their vital importance, and to apply the power of 
Need for analysis to ascertain correctly the proper 

greater spheres of each of them so that they may 

intelligence. function normally and produce a harmon- 
ious result. God in His infinite wisdom has not created 
anything without beneficial purpose. Ignorance with 



Terms and Principles 13 

_ its resulting misapplication and abuse is 

Ignorance , ., . f r ,.,,«, , 

dangerous. alone responsible for the ill effects that in- 
cite abortive attempts to destroy that which 
only needs enlightened treatment to become the source of 
public well-being. 

Society an Man is a gregarious animal forming collec- 

organization. tively an organism called society. Ex- 
pressed mechanically, this social body functions as a 
machine. Its first form is of the simplest kind with its 
different parts loosely jointed, maladjustment being the 
rule rather than the exception. A low order of efficiency 
which such an imperfect organization insures makes the 

existence of cooperation desirable only be- 
cobperation cause it is relatively more efficient than the 

still more wasteful individual action which 
it supersedes. The savage hunter sustaining himself by 
preying upon the game inhabiting his vicinage finds that 
some brother savage divides the territory with him and 
this process continues until the tribe is evolved. Then it 
develops that under the form of cooperation demanding 
division of labor each may specialize so that the wants of 
the community may be supplied better than if each indi- 
vidual were left to do all things for himself. As this 
community enlarges and its wants multiply, the necessity 

for closer cooperation and more efficient 
increased methods becomes imperative. As the minds 

of the people develop, the first evidence of 
an advancing civilization, their wants multiply and the 
social relationships become increasingly complex. Re- 
verting to the mechanical illustration, one may say that 
as the intensity of need comes apace the inventive faculty 
under this stimulus begins to devise methods by which 
wants may be more easily and plentifully supplied, re- 
sulting in a better readjustment of the social mechanism. 



14 The Way Out 



The extent of these improvements existing in the body 
stand rd f politic at any particular time may be ac- 
civiiization. cepted as a reliable index of the status of its 
civilization. The basic reason for cooper- 
ation is its power to give greater efficiency. If the indi- 
vidual could do by himself all the things that he wanted 
done as well and with the same expenditure of force and 
energy as he could do them in combination with others 
there would be no reason for cooperation and it would 
cease to exist. 

Once introduced and its benefits perceived, cooperation 
can never be abolished so long as man retains his powers 
of perception. Resting upon the unshakable foundation 
of necessity, expanding with the growth of human need, 
it becomes more and more an indispensible condition to 
the normal life and growth of the social body. It then 
is a social instrument, and like all other in- 
struments may be employed in either a 
instruments harmful or a beneficial way. The fact that 
it may be abused furnishes no reason for its 
destruction or the limitation of its use for right purposes 
any more. than the fact that the necessity for the execu- 
tion of one man who had committed a heinous crime 
would make desirable the destruction of the entire human 
race. Manifestly the wise and prudent thing to do is to 
facilitate and promote in every permissible way the ap- 
plication of the cooperative principle to effect such pur- 
poses as society may deem to be desirable. 

Cooperation begins when any two individuals work 
together to effect a common purpose and may be said to 
be both intensive and extensive. The former is best illus- 
trated by the combination of individuals to effect definite 
purposes, while the latter is recognized in the effects that 



Terms and Principles 15 

the sum of social activities have on the body 
units politic. Cooperation begins with the small 

unit and in the first stage results in a gen- 
eral multiplication of these small units rather than in 
a more intensive growth of any particular unit. Hence, 
we find in newly settled communities that business is 
done by many small concerns rather than by a less num- 
ber of larger operations. This process of small unit de- 
velopment continues until the field is crowded, when an 
economic loss results because the community is compelled 
to support more workers in a given service than are nec- 
essary for its performance. It is under 
such circumstances that competition arises, 
since it is only after the service required is less than that 
which can be performed by the agencies provided for such 
service that it can possibly arise. In such cases the larger 
reason for permitting competition is that society in order 
to prevent overcharge can afford the economic loss result- 
ing from devoting more labor than the service requires. 

If protection is secured to the individual by such 
method it nevertheless leaves society to pocket the eco- 
nomic loss, since there is never any compensation for 
wasted effort. Again, in every operation there is a max- 
imum of possible efficiency and any unit whose volume is 
less than that required to produce such efficiency can be 
eliminated by some larger unit possessing a higher degree 

of efficiency. After the field has become 
competition competitive, there necessarily follows in an 

advancing civilization a period of elimina- 
tion that results in the increase in the size of the units 
and in the diminution of their number. There are two 
principal methods by which this change is effected : viz., 
the collection of the small units into a combination, or the 
enlargement of a single unit, resulting in the destruction 



16 The Way Out 



of the small ones. Hence, the natural ten- 
Ten ency dency of all service is toward monopoly, 
monopoly ^e economic limitation of the size of the 

serving unit is the point at which enlarge- 
ment and coordination cease to result in economic saving. 
It is so far assumed that the operation will take place in 
accordance with economic law and that the substitution 
of the larger unit for the more numerous smaller units 
has been entirely on account of its higher economic effi- 
ciency. No account has as yet been taken of such en- 
largement as may have resulted from the abuse of mo- 
nopolistic power, which subject will receive subsequent 
notice. 

We have but to look about us and select any line of 
service in manufacture or distribution in order to visu- 
alize correctly the process we have been attempting to 
describe. The greatly increased economic saving made 
possible by the invention of machinery has made it easy 
to eliminate the smaller units of production and has 
thereby given cooperation a tremendous impetus. As 
these larger operations concentrate in productive effort 
it becomes highly essential that greater specialization 
should follow. This change requires that the workman 
rather than do many things indifferently shall do a few 
things and do them well. 

Use of Since competition is an essential stimulus 

competition. implanted in human nature for the purpose 
of producing excellence, no use of it can be justified that 
results in economic loss. Its purpose is constructive, and 
when its use is at the public cost, there must of necessity 
be a misapplication of the principle. There is no antag- 
onism between cooperation and competition when they 
are properly coordinated. The latter is the dynamic 



T erms and Principles 17 

force that insures a high order of efficiency in the former. 
The desire to excel is a primal instinct carrying with it 
an effort to surpass the accomplishments of others. 
Whether it is in a game of marbles, a foot race, progress 
in studies or the effort to outdistance others in manufac- 
turing, merchandising, banking, political life, or any 
other avenue of endeavor, this principle asserts itself. 
Man loves the test of strength or skill and each will strive 
to impress his prowess upon others. The higher the form 
of cooperation the better the opportunity for the exercise 
of this instinct. The general with his army of millions 
has greater opportunity to exhibit his powers of leader- 
ship and control than has the captain with his hundreds 
or the sergeant with his squad. 

Economics of The advance of cooperation is effected by a 
cooperation. course of progressive elimination of the 
unnecessary. The formation of a large unit to take the 
place of a dozen smaller units would reduce the number 
of necessary heads by eleven. This process continued 
throughout the organization will greatly reduce the over- 
head cost. The larger number of operatives employed 
will enable the directing forces by specialization to utilize 
the productive power of the combined workers more effi- 
ciently, and thereby increase the sum of production so 
that each participant may receive a larger share. If the 
savings were divided between producers and consumers 
it would enable the large unit to offer its wares at lower 
prices than the smaller units could afford. Waiving the 
question of the large unit's advantage on account of the 
greater volume of its production, it may well afford to 
rest its case upon the possibility of selling its wares at a 
lower margin of profit and reaping its reward by selling 
more at a small profit rather than less at a larger profit. 



18 The Way Out 



m , , . In the last analysis the large unit can out- 

The ultimate ,. . .. ,, , , ,-, 

of cooperation distance its smaller rival as long as the 
larger operation can effect an economic sav- 
ing, but when the point beyond which this is possible is 
reached, nothing save arbitrary power can preserve it. 

Society cannot afford for any reason to thwart the 
effort to reach the acme of economic and industrial evo- 
lution, neither can it permit abuse of power to maintain 
that which is economically inferior. The pathway of 
cooperation, in common with all other avenues of human 
progress, is not strewn with roses. It has its dangerous 
places, its pitfalls and snares to avoid. The 
Duty to ^y £ Q t rea( j ft, however, is plain and re- 

oopera e f usa l to do so is a cowardly admission of 

social incapacity. It should not be presupposed that firm 
adherence to the principle of cooperation in any way mil- 
itates against a full recognition and a thoroughly healthy 
development of the competitive principle. The contest 
need not be between the units of operation 
Competition in in Qrder to develop the full expression of 

cooperation. .... ., , , , -, 

competition, as it can do so more completely 
by bringing its forces into play between the constituent 
elements of the large cooperative unit. To suppose that 
this competitive principle should be mainly used to pro- 
tect the public from the rapacity of competing units is 
greatly to misunderstand and to underrate its true 
nature as a stimulus of social excellence. In the not very 
remote past the public mind was prepossessed with the 
idea of the service of competition as a police agent. The 
growing spirit of cooperation has destroyed its power for 
such service because those directing the activities of ser- 
vice have become sufficiently enlightened to realize that 
which predatory wolves long ago discovered, the simple 
fact that it is productive of better results to hunt in packs 
rather than alone. 



Terms and Principles 19 

The evolution has proceeded to a point where inten- 
tionally destructive competition is no longer possible, for 
regardless of law or other obstacles, the units of service 
thoroughly know that their best interest demands that 

they must function in accord with the coop- 
Self-interest erative principle. Man will act as his own 

self-interest dictates, and having sufficient 
intelligence to understand that the successful conduct of 
his enterprise depends upon cooperation with his fellow 
servitors, he proceeds to do it in the way presenting least 
difficulty. The recognition of a common interest between 

servitors, thus introducing class or partial 
C1 * ss . cooperation, has in many cases had the vis- 

coopera ion. .^ e ^? ec £ Q f c h ec kmg the cooperative evolu- 
tion. The large unit, desiring to secure a higher margin 
of profit than its services are worth, based upon its own 
cost, refrains from passing the saving on to the public. If 
the cost to the public were lowered to a point at which the 
smaller units could not survive, the larger unit would 
make indisputable its monopolistic character, which 
would most likely have the effect of strengthening the de- 
mand that the evolution be carried to its logical ultimate- 
public monopoly. For these two reasons the large unit 
cooperates with the smaller. The latter in times of scar- 
city takes advantage of the public needs, puts on all that 
the business will bear and sells at a higher price than the 
large unit, but when the public need abates it reduces its 
prices to that of the large unit or ceases operation until 
times become more auspicious. 

These conditions can only be regarded as a passing 
stage of cooperative evolution. The many abuses that 
creep into the movement are likewise but temporary af- 
flictions that society will eliminate as general intelligence 
develops and experience points the remedy. The pages 



20 The Way Out 



of history are replete with examples of evils that have 
affected the body politic but it also furnishes indisputable 
proof that many forms of wrong have existed from age 
to age but to be made absolutely impossible in succeeding 
times. Evils first exist in grossest forms 
and become gradually refined until they dis- 
appear. We can, then, adhere with hope to any sound 
principle with the assurance that the good within it will 
overcome the evil that may attach to it. 
rres e Perhaps the greatest danger confronting 

dangerous tne wor ^ to-day is that of arrested devel- 
opment. The safety and even the existence 
of the present civilization depends upon going forward. 
The evolution cannot rest. The choice left us is to pro- 
ceed, insuring life and growth, or to recede again to the 
dismal depths from which man after ages of struggle 
is only now emerging. 

Partial The thing above all others which has 

cooperation aroused most opposition to the orderly de- 
eve ops velopment of cooperation has been its par- 

class interests. . , , . . _,. . . , 

tial application. This has given rise to class 
interests which operate under selfish incentive and inflict 
injustices upon the least organized elements of society. 
The abuses arising from this cause have prejudiced the 
public mind against the principle of cooperation itself. 
This antagonism has found its expression in the enact- 
ments of the legislatures and the congress of the country. 
These unwise attempts to stay the rising tide of combi- 
nation have imposed upon the judiciary the 
Ju icia £ ag k f m aking law by strained construction 

interference 

in order to preserve the cooperative prin- 
ciple, and it may be regretfully said that in doing so it 
does not always eliminate the flagrant abuses that were 
provocative of the legislative attack on the principle. 



Terms and Principles 21 

Capitalism The term Capitalism will be used to express 
defined. ^he theory that capital or the available 

supply of products loaned or invested is entitled to a 
return for its use, and the term Capitalist 
will be used to designate the owner of the 
capital, who in the capacity of capitalist contributes no 
labor directly or otherwise to the use of such capital. In 
other words, capitalist, as here used, is synonomous with 
investor. If the capitalist, in addition to investing, con- 
tributes to the operation either mental or physical labor 
he acts in a dual capacity both as an investor and as a 
worker. 

Worker. The term worker will be used to describe 

one who contributes his effort to the operation, and this 
effort will include all expenditure of energy both mental 
and physical. It is intended that both labor of direction 
and labor of execution shall be classed together. 

land. The term land will embrace the natural cre- 

ation, including all spontaneous growths. It excludes 
human effort. 

Labor. Labor will be used to express the application 

of mental and physical force to produce a result and the 
latter will be designated the product. 

In order to reach reasonable conclusions regarding the 

economic status an understanding of the laws underlying 

it is indispensable. Political economy is 

. con °^ lcs founded upon ethics. Basic right principle 

founded upon it ., ■,-, m . T » , . 

ethics. underlies it all. This moral foundation 

gives stability to it. The task of the econ- 
omist is to analyze the complex operations of society and 
to make plain the divine, immutable law that governs 
them and to point out the effects of both its observation 



22 The Way Out 



and violation. This basic, ethical principle is absolute 
while man's relation to it is relative. The effects of con- 
formity to this law we call good and the effects of non- 

. . conformity we call evil. Man being in a 

Man finite. , , « . « ,. a. j? n i 

state of imperfection cannot fully comply 

with the requirements of the infinite, therefore his exist- 
ence and acts are a series of approximations. 

Natural law. Natural law is perfect, hence has the in- 
herent power of enforcing itself. It has its rewards for 
those who observe it and likewise its punishments for 
those who infract it. It is in this school with its rewards 
and punishments that man must work out his own sal- 
vation and learn from the bitter lessons of experience 
what cannot be taught him in any other way, that right 
living is fully in accord with that principle of self interest 
which seeks to acquire all that may be obtained of the 
things that contribute to one's well being. 

Compensation. TT . , , ,, , ,. -,•! 

Here, too, he learns that compensation, like 
an avenging Nemesis, is ever after the law-breaker, in- 
flicting upon him punishment in proportion to his viola- 
tions of the law. 

Evil destroys Happily, the beneficent Creator has pro- 
itseif. vided that evil, or the effects arising from 

the violation of law, carries within itself the elements of 
its own destruction. Without just appreciation, the fact 
that all things are governed by law and that compensa- 
tion compels obedience, administering such corrective 
punishment for violation as may be necessary, there is 

little hope of arriving at correct conclusions. 
effect Evil, primarily, is not a cause but an effect. 

Its existence indicates to the eye of the ex- 
perienced diagnostician the existence of maladjustment 
in some part of the social body preventing the perform- 



Terms and Principles 23 



ance of its proper functions in a normal way. Many- 
things which the ignorant believe to be reprehensive are 
entirely praiseworthy and quite essential to the welfare 
of society when their place is understood and the right 
application is made. The social problem is 
e socia trace out human instincts and tendencies 

problem. . 

and to bring them into proper relation so 
that society will function in a natural way, thus insuring 
beneficial results. 

Cooperation, communism, socialism and individualism 
are the expressions of basic human tendencies, all of 
which are necessary in their proper spheres to produce 
harmonious social action. Without combination and 
cooperation the highest possible efficiency could not be 
obtained. Without communism the emotional nature 
with its love and sympathy would become atrophied. 
Without socialism the struggle for justice to the indi- 
vidual would cease and without individualism, individual 
prowess and initiative could not exist. y 

The task and duty of society is to ascertain the respec- 
tive spheres of the basic human promptings, thus making 
it possible to enjoy the beneficial results of their proper 
uses. Unwise opposition to these principles 
annot can never d es troy them for they are essen- 

tendencies ^ial P ar ^ s °^ human nature itself. It is 
toward the elimination of their abuses that 
man's energy should be directed. There is, perhaps, no 
field that would be productive of better results than pa- 
tient and honest research in the further discovery and 
classification of these basis principles. If this construc- 
tive course were pursued we could with reason hope that 
society would make great strides in social organization, 
after which our social, commercial, industrial, and finan- 
cial life could proceed uninterruptedly in human service. 



24 The Way Out 



The abnormal selfishness of the intelligent 
selfishness ^ ew superinduces a biased leadership that 

misguides the ignorant many, making the 
correction of abuses an excedingly difficult work. This 
obstacle to progress furnishes the explanation of the un- 
fortunate fact that the world has always made a practice 
of crucifying its saviors, and makes eternally true the 
observation that without the shedding of blood there is 
Sacrificial no remission of sins. Without sacrificial 
effort effort there can be no salvation in this 

necessary. world, whatever may be said of the next. 

He who would see light in economic and social matters 
must, for the nonce at least, cast behind him his interest, 
his prejudices and his regards for that most powerful 
yet intangible thing called public opinion, and like the 
true scientist proceed with unremitting zeal to his objec- 
tive — the discovery of truth. 



CHAPTER II. 

LAND. 

Land is the basis of all life, vegetable and animal. In 
an economic sense it may be said to embrace the natural 
_ creation except man. The latter's power 

Power over . . , , ■, .-,. 

land. over it consists largely in the ability to 

change the form and place of matter. He 
can transform it from unavailable to available forms but 
can add nothing to it nor take anything from it. 

Man being a social creature, land is his common heri- 
_ tage. God created him and placed him 

labor. under the law of labor. His existence, de- 

velopment and happiness depend upon his 
obedience to this law. Not only is it his bounden duty to 
conform to it but it is his inalienable God-given right to 
do so. Production being the effect of force applied to land 
and man's life being dependent upon it, the right to land 
rests upon the same ground as the right to live. Man 
has an indefeasible right to land upon which 
ommon ^ eX p en( j fas force in order that he may 

ownership r «■..-,. -, , 

of land. carry out the law of his being and produce 

enough to sustain life. Air and water are 
no more essential to his existence than land. None will 
contend that man has a right to sell his own life or buy 
the life of another, yet, when a system of vested rights 
and land tenure is adopted, all except land owners are di- 
vested of their right to land and they live thereafter by 
the permission of land owners. 

This primal right to land is not exclusive but apper- 
tains to every human being, thereby placing society 
under a compelling obligation to provide proper methods 
for the enjoyment of it by all in such manner as will not 
impinge upon the rights of any. 

25 



26 The Way Out 



Let us suppose that A and B are the only inhabitants 
of the earth. They own it in common. B sells his un- 
divided one-half interest to A for a satisfactory consid- 
eration. This in law would give A an indisputable title, 
making him the sole proprietor of the earth. B could 
only live upon it by and with the consent of A. He could 
only apply his force to land in such manner and upon 
such terms as might be prescribed by A. Let us consider, 
too, that the right to possess carries with it by implica- 
tion the right to dispossess. If A thinks proper to require 
B to vacate, where will he go? Did not B, when he sold 
his interest in land, barter away his right to life itself? 
When man sells his right to obey the law of his being 
and can only conform to it by permission of others does 
he not violate nature's law and do violence to the man- 
dates of his Maker? 

Men born free That all men are born free and equal is now 
and equal. an( j k ag a j wa y S b een true. Not that any 
two of them are born with equal capacity or talent, but 
that all are born free to apply the mental and physical 
forces with which God has endowed them to carry out the 
law of being. In other words, they are equal in this, that 
God intended that they should have equal opportunities 
to make use of their powers to work out their own des- 
tinies. 

The right to live, move, and have our being, to apply 
our force to land in order to produce is deeply funda- 
mental. We have no more right to sell it 
than we have to forfeit our lives for a con- 
sideration. No court would enforce a con- 
tract involving the direct sale of human life. It would 
declare such a contract void as being against public 
policy. 



The right 
to life. 



Land 27 

Land, being a common heritage cannot be regarded 
as property haying an exchange value. It may be ob- 
served, however, that labor belongs to the laborers and 
that force expended on land gives results. These results 

are the property of him who did the work, 
onabor ltS Therefore, it is only the land itself that has 
property no va ^ ue as property, but the improvements 

resulting from human labor are clearly 
property and are therefore legitimate subjects of ex- 
change. 

If A resides upon a tract of land, fences and ditches 
it, enriches it, plants trees and builds houses upon it, not 
only would it be an injustice to allow B to possess and 
enjoy without compensation the benefits arising from 
A's labor and forethought, but it would also be a flagrant 
violation of the ethical principle that demands that each 
worker shall have the result of his labor. 

No conflict The reconciliation of the apparently con- 
of rights. flicting rights involved in the common own- 

ership of land and the individual ownership of improve- 
ments presents to many minds a most serious difficulty. 
The conflict is more apparent than real. When the prin- 
ciples are thoroughly understood it will be found that 
there is no conflict between them but that both are sound 
and practicable. The important points are that the in- 
dividual's right to that which he produces shall be amply 
protected, that none shall enjoy the fruits of his labor 
without making due compensation, and that none shall 
possess vested rights in that which is the common heri- 
tage. The right of the workman to all the products of his 
labor is clear, and the right of all to a just participation 
in that which by natural law is common property is 
equally obvious. 



28 The Way Out 



Democracy From this doctrine of common rights we de- 
rests upon <juce thg underlying principles of demo- 
common ng- ts. cra ft c government, which necessarily pre- 
supposes the existence of a social unit. Such a form of 
government cannot exist except in so far as a common 
interest runs through its institutions, and it is only under 
such conditions that the individual can hope to come into 
full possession of his right to live, move, and apply his 
powers in accomplishing the purposes for which an om- 
niscient God called him into being. 

Opposing In this connection there exist two theories, 

theories of The one, that man is a homogeneous cre- 
t e creation a ti on and that ethnologically there exists no 

of man. . -...,,, , . « 

natural reason to limit the application of 
the democratic principle. The other rests upon the as- 
sumption that there were separate creations of man, ne- 
cessitating the restriction of the application of the demo- 
cratic principle to each race in its own jurisdiction. 
Under this theory the principles of democracy cannot be 
applied to a mixed society but are practicable only in ter- 
ritories in which racial homogeneity exists. Where dif- 
ferent races inhabit the same territory uniform prin- 
ciples will only apply to the stronger race, forming a dem- 
ocratic oligarchy. If this theory is correct and demo- 
cratic government is to obtain, it clearly makes necessary 
the segregation of races, assigning each to its part of the 
earth's surface where it may develop its own civilization 
untrammeled by racial antagonism. The purpose of re- 
ferring to these different theories at this point is not to 
discuss their merits, but simply to point out that the ac- 
ceptance of the theory of separate creation, while it may 
_. . . f make necessary the acceptance of the prin- 
the land. c ^ e °^ division of the earth, does not in any 

way militate against the contention that 
land is common property. 



Land 29 

Vested rights Once granted that vested rights in land are 
in land de- valid, it must be admitted that men are 
s roys equa lty jjgj^jjgj. \y 0rn equal nor free, but that they 

must live and share in the benefits of nat- 
ural wealth by permission rather than by right. Such an 
assumption would give the proprietor having a natural 
monopoly the right and power to compel his fellow men 
to labor and accept in return only such part of the result 
of their labors as the owner might prescribe. Such an 
arrangement penalizes the worker for carrying out the 
mandates of the natural law under which he has his 
being. Under no circumstances can it be admitted that 
one individual should have the right to take without com- 
pensation and without consent the products resulting 
from the labor of another. Neither can it be admitted 

that society, acting through its agency, the 
fh • t 5- 0f, ij government, has the right to take the pro- 
in property ducts of the individual, except so much as 

under equal and uniform laws may be nec- 
essary to discharge a common duty or provide for a gen- 
eral service. When, therefore, individuals acting singly 
or jointly seize upon the treasures that the Creator has 
stored in the bowels of the earth for the common use of 
its inhabitants and proceed to demand that mankind shall 
pay tribute for the privilege of using this wealth created 
for all, they, by force of mistaken theory supported by 
human law, wrest from the dispossessed part of mankind 
a part of their products without giving anything in re- 
turn. It is of course understood that this exaction is con- 
fined to the part received for the ownership of the mines 
exclusive of the cost of mining and preparing the product 
for market. 



30 The Way Out 



Abuse of the Think of the immense power that the pri- 
common right. va £ e ownership of natural wealth vests in 
the few and of the untold deprivations and misery that 
the abuse of this power occasions ! Can one conceive that 
an omniscient Creator decreed that these things should 
be owned by a small number of the inhabitants of the 
earth and that the greater part of mankind should enjoy 
them, if at all, by sufferance? Even in this enlightened 
age there are some of the possessors of natural wealth ab- 
solutely essential to life and happiness who have brazenly 
proclaimed that divine providence has bestowed this 
wealth upon the select few, which by implication declares 
that if providence and its vice-gerents should so ordain 
the people must tamely acquiesce. 

If A owns the vested right in the coal lands and B owns 
the iron lands, can they not refuse to exchange products 
and deny the rest of the world access to them? In such 
cases have they not the right to place their own estimate 
of value upon these things and compel mankind to meet 
their exorbitant views or, failing, do without them? But 
what are the rights of the people, the hopes of a progres- 
sive civilization, yea, the lives of millions, compared to 
the sacred white elephant of vested rights in real estate? 

Land existed before human law came into vogue. 
Man's law is simply the embodiment of his conception of 
the rights that should obtain in the existing state of civ- 
ilization. The institution of vested rights in real estate 
was peculiarly conventional. There was nothing partic- 
ularly sacred about it, and like other man-made laws it 
should be continued only as long as in the judgment of 
the people it represents the most practicable approxima- 
tion to the natural law governing the case. It has behind 
it the power of precedent and long existence. But so had 
human slavery. 



Land 31 

The wisdom of moving carefully in the matter of 
changing old and well established systems is fully recog- 
nized, but this laudable conservatism should not be al- 
lowed to degenerate into indiscriminate acceptance of 
hoary wrong. 

The contention here is not that existing customs should 
be abolished in toto and an entirely different system in- 
troduced, but the purpose is to urge the acceptance of 
the correct premise and to insist upon the right to make 
application of the correct doctrine whenever public 
exigency may make it desirable. The establishment of 
the soundness of the principle is the important point. 
The acceptance of this premise by no means commits 
society to any particular degree of application of it any 
more than the acceptance of the right of the public to in- 
troduce a system of police supervision commits it to the 
policy of having all human activities supervised. In 
thickly settled communities the police force becomes 
highly necessary, while in the more sparsely settled dis- 
tricts their services would be useless. Just so in the ap- 
plication of the doctrine of the common ownership of 
land, it would stand society in good stead in exceptional 
cases while it would not be of practical importance in 
many others. 

Conservative Once the true principle is accepted, there 
change of appears to be no valid reason why the 

system. change of system should not come about in 

a conservative way without harm to any except the im- 
mediate beneficiaries of public wrongs. The application 
of the new principle should be confined to those cases in 
which the public exigency requires it. When individ- 
uals or combinations of them seize upon natural riches 
and proceed to impose exactions upon mankind, the as- 
sertion of the true principle will stand the people in good 
stead. 



32 The Way Out 



From the premise that land, with all that is stored in 
it and all that it produces spontaneously, is a common 
heritage made by the Creator for the common benefit, 
more enlightened and equitable deductions can be drawn, 
viz., that the minerals, ores, and timber are common 
property, and that he who applies his force to their appro- 
priation owes compensation only to the State as the repre- 
sentative of society, and that he has no ethical right to 
add to the labor cost of his products anything except so 
much as may be necessary to cover the amount paid so- 
ciety for them. This public charge for material and a 
proper wage for his labor are all that should be added to 
the product. It is, of course, admitted that in the compu- 
tation of the wage due weight should be given the risk 
involved and a proper insurance charge added, which, if 
correctly done, will only serve to cover actual losses. The 
payment to society for the material, the amount of a fair 
wage and the correct insurance charge compose the cor- 
rect price of the finished product. If more than this is 
added it cannot be justified upon ethical grounds, and 
such excess becomes an exaction which society must bear 
on account of the social maladjustment that makes it 
necessary or possible. 

The desire of the individual to swell his income by the 
increase of this inethical charge, with mere possession as 
the motive, can only be regarded as a moral delinquency, 
that is to say, a wish to possess that which belongs to 
another and a willingness to acquire it without giving 
adequate compensation in return. When this attitude of 
mind is thoroughly analyzed, it will be found to rest upon 

the same basis as robbery. Any economic 
the weak. system that functions on this principle will 

necessarily give rise to the spoliation of the 
weak for the benefit of the strong. 



Land 33 

The common right in land, inalienable in its nature, 
rises paramount to the title that any Esau can possibly 
make. This doctrine of common ownership of land is 
not new and is still recognized to a limited extent in the 
law of eminent domain. As the public good 
domain demands land, the law provides under cer- 

tain conditions for its condemnation. It is 
true that the application of this principle has been more 
or less restricted, the reason for which may be found in a 
lack of the recognition of the necessity for it. That all 
the relations of land, labor, and the rights 
bylaw °^ individuals should be regulated by law, 

whenever recognized as socially necessary, 
is readily admitted. That the law should provide safe- 
guards to protect the industrious toiler against the cu- 
pidity of predatory neighbors and insure him the safe 
enjoyment of the fruits of his labors is patent to all fair 
minds ; but it is equally plain that safeguards should like- 
wise be provided against the injustice that results from 
a seizure by a part of the people of that which belongs 
to all the people. 

That anyone should have the power to hold unimproved 
and uncultivated land while homeless thousands stand 
ready to occupy and employ their productive force upon 
it is so palpably wrong that no argument should be neces- 
sary to prove it. One of the most indefensible practices 

resulting from the doctrine of vested rights 
inland * s speculation in land. From the small lot 

to the vast forests, it is a common practice 
for the speculators to withhold this land from use. Like 
the proverbial dog in the manger, they will not use it 
themselves nor permit others to do so except upon terms 
highly favorable to themselves and exceedingly unjust to 
those who of necessity must submit to the imposition. 



34 The Way Out 



Such an act is an unrighteous seizure of the common pos- 
session and is for the purpose of holding land out of use 
until the labors of others have developed the adjacent ter- 
ritory, or until the public need for its use has become 
sufficiently pressing to enable the holder to levy tribute in 
the way of profit on land. This practice alone should be 
sufficient to convince unprejudiced minds of both the in- 
justice and the unwisdom of the doctrine of vested rights. 
The possession of a piece of land around which a million 
people are gathered brings to the owner untold wealth 
in the exchange value of land for which he has not so 
much as lifted his finger. We know that there is no 
legitimate way that wealth can be acquired except by 
labor or gift. Hence, as the owner of land reaps a rich 
harvest where he has not sown anything, it is fair to 
assume that there is something radically wrong in the 
proposition. 

Retards devel- Not only does this doctrine permit the few 
opment. ^ appropriate the value created by the 

many but it permits the landowner to retard the progress 
of desirable aggregation that would otherwise be pos- 
sible. It is often the case that useful ground is kept out 
of use for years until some fortunate death removes a 
social incubus and makes possible improvements that 
would have been made years before had the land been 
free. The proposition that all men should have access to 
land for the purpose of labor and use is well founded, but 
it is plainly in derogation of the common right to permit 
anyone to hold land out of use. 

Another important deduction from the premise that 

land is a common heritage is, that whenever 

amages ^ ^gj^ f em inent domain is to be exer- 

under eminent . _ ° 

domain cised, the measure 01 the damages to the pri- 

vate holder should be a fair compensation 
for the improvements on the land. That is to say, the 



Land 35 

holder should receive full compensation for everything 
on the land that has resulted from labor, but the land 
itself should be considered without exchange value be- 
cause the fee resides in the whole people and such title 
cannot be rightfully sold. When society needs land for 
a public purpose, in justice it should be permitted to take 
back its own without cost save just compensation for ex- 
isting improvements. 

The question naturally arises as to the justice of taking 
for nothing that which has been bought and sold for gen- 
erations. Have not these sellers and purchasers, acting 
in good faith, conformed to the law and custom of the 
land, and thereby cured whatever defect may have ex- 
isted on account of the original common interest? The 
. common right is inalienable, hence could 

inalienable never rightfully be sold. Such transfers of 
title were and still are against the natural 
law that has always existed. When the king or sovereign 
held the title, he did so not in fee but in perpetual trust 
for the benefit of that immortal ward called 
immortal society, and his power over it mostly con- 

sisted in the right to subject the holding to 
beneficial use. Any attempt, therefore, to alienate title 
by vesting it in any part of society to the exclusion of the 
rest was an abuse and a betrayal of a perpetual trust 
which no human law could make valid even if it were 
sanctioned by the unanimous consent of the living mem- 
bers of society, for the very simple reason that, while they 
themselves might be willing to such a transfer of title, 
they would have no right to impose their will and judg- 
ment upon succeeding generations. The latter would 
still have the right to claim title under natural law. 

Under human law slavery existed. Men and women 
were seized and sold as commodities in the market. They 
were property, yet when the public conscience and intel- 



36 The Way Out 



ligence were sufficiently developed to recognize that the 
institution was in violation of the natural right, it was 
fully wiped out of existence and the holders got nothing. 
Even now if land is sold and bought in perfect good faith 
and the third party comes along proving a prior right, the 
law gives him the property and offers no redress to those 
holding the land except recourse upon the parties from 
whom it was purchased. In the case of land, this re- 
course would likely lead back through a long line of in- 
dividuals, finally resting with the State which had 
granted away the people's heritage for a paltry consid- 
eration. 

If, then, the statute law does not protect the buyer 
against claimants proving priority of title, by parity of 
reasoning, the people, when they can demonstrate that 
their title as common owners is better than that of the 
private holders, should receive their own again without 
cost other than the amount the State originally received 
for it. While it is true that the individuals now owning 
the land may not be responsible for the inauguration of 
the system, it is equally true that the people at large who 
are injured are no more responsible. Since the private 
holders have reaped the advantage accruing from this 
violation, and the people have suffered all the loss oc- 
casioned by it, there is, in spite of a degree of injustice in 
special instances, as is usual in a process of readjustment 
in a general way a more or less accurate division of 
profits and losses. This objection, then, does not furnish 
a valid reason against the reestablishment of the correct 
doctrine. 

Repossessing Should it ever become necessary for the gen- 

mines, wells, era j government to take over the mines and 

wells of the country, it would owe to the 

present owners the full cost of all existing improvements, 



Land 37 

but for the ore beds and oil sands nothing as a matter of 
justice should be paid. It is quite conceivable, however, 
that it might be good policy to compensate owners for the 
land in a reasonable way, not as a matter of right, but as 
one of expediency. 

Our constitution provides that private property shall 
not be taken for public use without just compensation. 
The Congress has the power to prescribe the method of 
ascertaining such compensation. Any change of prin- 
ciple in this regard must necessarily be accomplished by 
constitutional amendment. If such change were effected, 
restoring the fee to the public, making its ownership of 
natural wealth clear, it would still, perhaps, be expedient 
to provide by statute for taking over land already held 
by private parties, and for paying the holders the value 
of improvements based on cost, or cost of replacement, 
whichever was the lower, and a fair price for the land not 
in excess of actual cost to the holder. Due deductions, 
however, should be made for whatever depletion may 
have occurred in the natural resources since the date of 
the holder's purchase. Such payment for the land itself 
should be regarded as a largess to soften the rigors that 
would necessarily follow the too strict enforcement of the 
correct principle. In ascertaining the amount of such 
largess no element of profit or increased value based upon 
prospective gains should be allowed to enter. 

There is nothing in the doctrine of common ownership 
of land antagonistic to the view that each individual, 
under the law, should hold and till the land, possess and 
enjoy without molestation the fruits of his labor. It only 
denies him the privilege of seizing and holding land which 
he will not use himself nor permit others to use. Neither 
will it permit him to take possession of nature's riches 
and force others who are entitled to their part to pay him 



38 The Way Out 



an exorbitant price in order to get them. To assume that 
the Creator placed minerals, metals, and oils in the bowels 
of the earth to be the exclusive property of a few of his 
creatures, thus creating a private interest in these essen- 
tials of human progress and happiness, denies at once the 
sublimity of His character and brands Him as the author 
of injustice. Let us suppose that there existed a tropical 
country that produced spontaneously everything neces- 
sary to the support and happiness of the population. 
Would there be any justice in a system that permitted a 
part of the inhabitants to monopolize these natural gifts 
and impose upon the rest the terms upon which they 
might participate in the provision that nature had made 
for all? 

Effects of pri- A contrast of the two theories brings out the 
vate ownership salient points. Under the doctrine of vested 
of and. rights land is made property, hence has ex- 

change value. This makes it the subject of purchase and 
sale and introduces fluctuation, which induces specula- 
tion. It follows that land will be bought for no other pur- 
pose than to reap the advantage of increased value. The 
result of this is to curtail the use of land. This is accom- 
plished in two ways: first, by holding land out of use, 
second, by increasing the price of land, thus making it 
more difficult to those wishing to put it to proper use to 
do so on account of the increased amount of reserve cap- 
ital necessary to accomplish the object. One wishing to 
farm twenty acres may have sufficient reserve to furnish 
all the necessary teams, tools, and food supply but has 
nothing to pay for land, hence is debarred from engaging 
in production. If he rents the land from the owner he 
must give a part of his production for the privilege of 
working. There is nothing better established than that 
the laborer exerts himself in the proportion that he re- 



Land 39 

ceives the result of his labor, hence the ownership of land 
by others than the person doing the work is a repressing 
influence upon production itself. 

Effect of The effect of land having value is to reduce 

land value. the number of independent laborers and 
correspondingly to increase the dependent class. It 
abridges the opportunity to till the land upon terms that 
admit of the laborer receiving the full measure of reward 
and swells the number of laborers who must of necessity 
apply their force to land by permission, in return for 
which they must surrender a part of the production. The 
direct result of this is to create a dependent class who, if 
born with equal rights, loses them in early infancy. The 
general effect of this erroneous policy may be seen in the 
large area of uncultivated fields which might be held in 
small quantities by thousands who would hail the oppor- 
tunity of having a home where they might live on the 
fruits of their labors. 

Considering land as property gives it a prospective 
value that is taken into consideration and forms a certain 
part of the present worth, thus tending to make land 
more valuable than the present demand for use would 
justify. The immediate effect of high land value is con- 
gestion of population. In the hamlet where land is cheap 
the humblest have yards in which children may play and 
enjoy the fresh air, but in the large cities where every 
inch of ground represents a high value, the poor are 
stowed away in hovels like sardines in a box and even the 
wealthy have to practice economy in ground. 

High land value acts as a repressive influence on de- 
velopment. If the land cost ten thousand dollars and the 
building cost the same it is clear that no one can build 



40 The Way Out 



who cannot command the combined sum. If, however, 
the land cost nothing, it would require only one-half the 
amount to produce the same result. The tendency to 
overcrowd in cities is in large measure attributable to the 
policy of making land property. It is manifest that 
under such circumstances the rich would avail themselves 
of this opportunity to oppress the poor. 

Go around almost any town and observe the unused 
land which would be sufficient to furnish homes and gar- 
dens for thousands who are yearning for a spot upon 
which they can locate their families, which are now com- 
pelled to live in dens of immorality and vice. These un- 
sanitary and sordid abodes of squalor and 
human greed m i ser y demonstrate, as perhaps nothing else 
can, the baseness and infamy of human 
greed. It really seems that man, for it is an indictment 
of the race, will cling to the unjust advantage though it 
sink a part of the human family into perdition. If the 
waste lands around almost any city were open to cultiva- 
tion there could be produced upon them a large part of 
the food supply of that city. 

The business world has long since realized the truth 
of this doctrine, and communities in conformity to it offer 
free sites to enterprises. If, then, the principle of private 
monopoly in land is inimical to progress and places a 
burden upon enterprise, it clearly becomes 
. . , A the duty of society to substitute a better 

trme needed. J J 

doctrine. 

The theory that land is a common heritage created by 
a just God for the benefit of all His people gives quite 
different results. Under this conception land has abso- 
lutely no exchange value; it can neither be bought nor 



Land 41 

sold. No one cares whether or not a given place will be 
important ten years from now. The interest in land is 

confined to questions of present use. If no 

60 S ° • h+ present use can be found for it, it excites no 

inland further interest and it is left free for the 

next comer who will decide the question of 
occupancy of it upon grounds of utility. Under this 
theory the barren fields and lots in and near cities would 
disappear as if by magic. Laborers would come forward 
anxious to use them for purposes of dwellings or gardens. 
Where the unsightly lot now lies belonging to some estate 
in process of legal spoliation which may cover a period 
of many years, there would spring into existence a smil- 
ing garden pleasing to the eye, furnishing fresh food to 
hungry children that under present conditions must exist 
upon meager rations. 

If the human family could only be made to see the evils 
growing out of this unjust system — a conventional Mo- 
loch feeding upon the weaker members of society — it 
would wipe it out of existence. Man is gregarious. He 
prefers to live in communities. There are manifold ad- 
vantages in the cooperation that this makes possible, and 
if this matter of common right in land could be rightly 
adjusted it would increase the possibility of concerted 
action and greatly augment the stimulus so necessary to 
social elevation. It is true that the destruction of mo- 
nopoly in land would injure pecuniarly those now receiv- 
ing the benefit of the unjust exaction, but even that would 
be more than repaid by the moral elevation of the whole 
that would follow the introduction of the more ethical 
practice. We flatter ourselves that we have advanced, 
that we have developed beyond the evil that assailed our 



42 The Way Out 



progenitors in the dark ages. Is this true except in de- 
gree? Have we destroyed the principle upon which those 
ancient abuses rested? 

Feudal tenure. In feudal times the holder of land held it 
subject to military service, the fee remaining in the lord. 
What difference in principle exists between the lord of 
feudal times and the holder in fee simple of to-day? Ab- 
solutely none. Vassalage, though refined, still remains. 
One class is still the servant of another class. If land had 
no exchange value there are few cities that could not be 
supported by the product of the vacant ground within 
and around the corporate limits. Once give it exchange 
value, the amount of capital required to hold it is in- 
creased to the extent that but few can be proprietors and 
the cost of operation is so advanced that the margin for 
the agricultural wage disappears. The result is that the 
tiller of the soil is driven back to more remote regions 

where the exchange value of land is not so 

Production great. Surely it must be a mistaken policy 

nven ar er ^^ drives production a way from the point 

need of greatest need. There is certainly room 

for honest inquiry when the effect of any 
policy makes the distance greater between production 
and consumption. They are twin sisters. The closer 
they are together the better for both. 

The greatest blessing resulting from improved methods 
of transportation is the facility for bringing the produc- 
ing and consuming elements of society into closer rela- 
tion. There are many advantages to be derived from ag- 
gregation that cannot be had from sparsely settled com- 
munities, and the removal of the evils that have hitherto 
impaired urban growth would likely lead to an advanced 
civilization that is now impossible. 



Land 43 

It is the idealist only who fancies that these things can 
be brought about easily. They must come, 
Evolutionary jf a ^ a j^ ^y ^ e s i ower b u t surer methods of 
methods of evolution. The enlightening and uplifting 
influences of education must smooth the 
rough places and the birth of the new era must be by 
stages. In vain will the ignorant and impatient expect 
the benefits of this change to come by harsh and revolu- 
tionary methods. It is one thing to subscribe to a broad 
principle but quite another to construct the methods of 
transition from one premise to the other. Many ways 
have been suggested for the cure of land monopoly. 
Among them have been included everything from the an- 
archistic theory, which would destroy all law and the 
rights enjoyed under it, to the single tax plan of Henry 
George. 

If permanent and satisfactory results are to be ex- 
pected, whatever is done should be done by the people 
acting through their own organization, the government. 
All steps taken in this direction should be of 
methods best a tentative character. While fully commit- 
ting themselves to the principle, the people 
should be cautious and conservative in its application. If 
the man is sick and the doctor is absolutely sure of both 
his diagnosis and the proper remedy, he is careful to 
graduate the dose to suit the physical condition of the 
patient and thus restore him by degrees without incur- 
ring the risk of dangerous reactions. The government's 
taxing power does not commend itself as the proper agent 
for curing this evil. The proper use of this power is to 
collect revenue, and any other application of it, even 
though with benevolent intent, is apt to result in a pros- 
titution of power and an imposition upon the people. 
Perhaps the best point of attack in the case under discus- 



44 The Way Out 



sion will be found in monopoly holdings of lands, wells, 
and forests. The industrial evolution has proceeded far 
enough in these things under private initiative to demon- 
strate, not only the desirability, but the urgent need of 
making this change. Beginning thus with the large units 
of production necessarily monopolistic in character, ex- 
perience will indicate the necessary expansion of the 
principle. 



CHAPTER III. 

PRODUCTIVE LABOR. 

Labor, the The correlation of man's energy, mental and 

law of being. physical, for the purpose of production, rep- 
resents his effort to conform to the law of being which 
makes life depend upon exertion. This energy may be 
divided into mind force and material force. They are 
both present in the make-up of every normal individual 
varying, of course, in degree and intensity. 

The erroneous classification that allots mental force to 
one class of workers and physical force to another is re- 
sponsible for much of the confusion of thought and mis- 
understanding that exist on this subject. There is no 

exertion of physical force, if it is to be pro- 
mind and body ductive °f results, that does not require the 

exercise of the mind power of the worker. 
The more intelligently physical force is applied the more 

effective it becomes. The invention of the 
^ ffe f iv o e ^ ss plan may call for only mental effort but the 
to intelligence execu tion of it requires the exercise of both 

mind and body, even in the most inconse- 
quential particular. 

Manifestly any arbitrary division of human beings 
into two classes, the one using the mind and the other the 
muscles is entirely at variance with the facts of the case. 
It follows that deductions drawn from such an unsound 
premise would most likely be erroneous. In the world's 
workshop there is need for some whose tasks will require 
a larger degree of mental effort while others will be called 
upon for a larger share of physical energy. In all cases, 
however, each worker must employ both if he is to be 
effective. Whether the individuals use their heads or 

45 



46 The Way Out 



their hands most does not alter the fact that all of them 
are co-laborers in doing the world's work. 

Mental and physical powers may be considered as the 
positive and negative elements of man's make-up. Both 
are powerful when combined. They are essential to each 
other and when normal act in harmony. Each is fruit- 
less by itself. The mind force plans, and 
practice physical force executes; the one is the 

theory, the other the practice ; the one gives 
the law, the other executes it. They must act together 
because the law unexecuted is only a mental conception, 
while execution without conformity to law is only chaotic 
disturbance. 

When these forces are acting in harmony the mind 
plans, organizes, and directs, while the physical force 
acting under instruction makes the implement and wields 
it to bring about the change of form in substance that 
we designate as production. 

Man without Man with all his boasted wisdom has abso- 
creative power. j u tely no creative power. He is surrounded 
on all sides by the impassable barrier of natural law. 
His highest accomplishment is found in the exercise of 
his inventive faculty that searches out and comprehends 
the law, making such an application of it as will result in 
facilitating the change of matter from unavailable to 
available forms. 

The effort to harness the forces of nature and cause 
them to serve man is peculiarly the work of the mind, 
which is simply endeavoring to relieve the body of the 
burden and drudgery of physical labor. Nature's stores 
are boundless and indestructible. In this laboratory man 
may carry matter through all its varied forms in prepa- 
ration for such beneficial uses as investigation and ex- 



Productive Labor 47 

, . perience may have indicated. This is the 

tiv^diitv 1 ' 6 a imperative duty of man. Mental develop- 
ment tends to an improvement of methods 
and the invention of new processes that serve to increase 
the effectiveness of labor. 

The social Regarding society as a single unit each 

unit - member of it comes under an obligation to 

do his part effectively, since the success of the whole is 
dependent upon securing the proper results from each 
component part. It should be remembered, 

Ttttq classes 

of society however, that society is naturally divided 

into two classes; the one self-supporting or 
capable of self-support, the other dependent. To the 
former must be applied the socialistic principle of distri- 
bution, giving to each individual as nearly as may be the 
part of the production contributed by him, while the 
latter must share according to the communistic principle 
that takes from the strong a part of his production and 
distributes it to the dependent according to the need. 
The children, the weak, and the aged are the 
communism wards of communism. It is society's duty 
to provide for this class either through the 
agency of the family, the locality, or the State, and no 
harm comes from it so long as such provision is confined 
to the genuinely dependent. These non-workers must 
be excepted from the laboring class. Those who eat yet 
work not but live upon the income on capital, whatever 
classification they make for themselves, do as an eco- 
nomic fact belong to the dependent class and are charges 
on the workers. 

Not only must laborers work but they must do so effi- 
ciently. In order to meet this requirement 
work one must devote both time and talent to the 

accomplishment of the task in hand, avoid- 
ing either extreme of overwork or underwork. The goal 



48 The Way Out 



to be reached is the maximum production for the amount 
of energy that can be expended without overtaxing the 
worker, since this would dissipate the reserve force neces- 
sary to keep him in proper condition to continue his 
efforts. It is not intended that the worker should be con- 
sidered a mere machine to be kept in repair and operated 

until worn out. He is a machine and a very 
of man complex one but he is more than that, he is 

a human being, and mere physical produc- 
tion is only a method of providing means for that more 
important result of developing the mind and soul with 
which the father, the mother, the citizen, should be en- 
dowed. 

"In the sweat of thy face shalt thou eat bread" was not 
a curse put upon man but one of God's choicest blessings. 
This apparently stern necessity contains the elements of 
man's success, yea, his salvation. Honest work is at once 
the most important factor in human development. Not 
only must man work efficiently, but what is of equal im- 
portance, he must do so in accord with the 
utility demands of utility. If civilization is to ad- 

vance, the workers must conform more and 
more closely to the requirements of utility. Since what 
is one man's food is another's poison, the task of drawing 
an exact line between work of utility and that of non- 
utility is exceedingly difficult, not to say impossible. The 
establishment of the doctrine that utility should govern 
the selection of the kinds of things to be produced, or at 
least be an important factor in the decision, is perhaps all 
that can be hoped for. 

In a general way, the thing may be said to be of utility 
if its use increases the average good of man while pro- 
ductions that do not measure up to this standard may be 
said to be of non-utility. In the exchange of labor it may 



Productive Labor 49 

occur that one party to the exchange gives 
utiiit work of utility for that of non-utility. The 

man making rum may exchange it with the 
woodchopper for wood, thus exchanging a work of non- 
utility for one of utility and transferring the economic 
loss from the rum maker to the woodchopper. The owner 
of a house, in building, exchanges with the carpenter and 
other workers products of utility for others of the same 
kind in so far as the building may be in accord with the 
demands of utility, but all parts which may be in excess 
of those requirements represent an economic loss to the 
owner. 

Economic This economic waste is especally noticeable 

waste - in the construction of buildings for public 

use. Instead of these buildings being in accord with the 
simple demands of utility, which look mainly to the prac- 
tical use to which they are to be put, in many cases the 
cost of the unnecessary appears to exceed the cost of the 
useful. Charity is preached in buildings, the construction 
of which involves a waste that would go, if saved, a long 
way towards alleviating distress that might not exist at 
all if the economic law had not been violated. When it is 
considered that work of non-utility is a waste of effort, 
hence a loss to humanity, it becomes obvious that such 

losses are transferred from the stronger to 
osses rans- ^ e weaker. This shifting process con- 
weak tinues until the burden finally rests upon 

the weakest elements of society. This being 
true, the impoverished mother whose milk fails to furnish 
proper nutrition for the babe may with justice look upon 
the waste involved in the construction of the towering 
edifice as responsible in a measure for her deprivation. 

With a clear understanding of this economic process 
it requires but little stretch of the imagination to picture 



50 The Way Out 



the vainglorious pile composed of brick and mortar to the 
extent of its utilitarian use, while its vaulted domes and 
towering spires are artistically constructed of the inter- 
woven bones of dead infants who have fallen victims to 
this violation of economic law. 

The cry is for ornament, but when we look through the 
gaudy curtain and see conditions as they really are, the 
tragedies and the suffering, the momentary pleasure to 
the eye and the gratification of exulting pride little com- 
pensate for the sickness of soul that seizes us. The disre- 
gard of the demands of utility runs through society; it 
shows in architecture, the dress, the equipage, and even 
in the funeral procession. 

It is entirely true that man cannot live by bread alone, 

for there is implanted in him a love of the 

useful beautiful which must of necessity find its 

expression in the products of his hand. It is 

well, however, to remember that there is no antagonism 

between simplicity and beauty. It too often occurs that 

the ornate and gaudy are the products of the attempt to 

create the beautiful rather than the beautiful itself. 

Beauty has its use, nor need it be at the expense of utility. 

There is no economic reason why things 

Uffliness not 

a virtue should be unsightly, but on the contrary, 

there are many reasons why they should be 
as comely as possible. It is here insisted only that the 
standard of the esthetical shall conform as closely as pos- 
sible to good taste and good sense. When the lady's hat 
is composed of a few dollars' worth of material designed 
to give comfort and protection and many dollars' worth 
of plumes, appendages and gewgaws that would do credit 
to a savage belle, there arises a serious doubt as to the 
wisdom and propriety of the construction. 



Productive Labor 51 

Much of the effort at ornamentation, instead of being 
due to the love of the beautiful is much more likely to 
_... ., stand out as the manifestation of that silly 

Silly vanity. . . 

vanity that would appeal to the admiration 
of some and to the envy of others. Women are perhaps 
in this respect most culpable. The extravagant debu- 
tante of to-day differs but little from her uncivilized 
sister of the plains who with her tinsel and red shawl sits 
in state to receive the adulation of her votaries. 

It is to be hoped that man may advance to the point 
that dress may be for comfort and health ; when the build- 
ings will be erected for the use to which they are to be 
devoted ; and churches will be constructed for the purpose 
of furnishing accommodation to those who attend them 
to hear the exposition of God's law. When this stage has 
been reached the church building will likely be regarded 

as so much brick and mortar put to a good 
of God use rather than a sacred edifice reared in 

honor of the Creator, and its attendants will 
realize more clearly than now that the true temple of God 
is within themselves and that its adornments must con- 
sist in the development and consecration of their own 
social and spiritual lives. 

Signs of No surer sign of decadence in a nation could 

decadence. ex j s t than that evidenced by an increasing 
tendency to indulge in things of non-utility. The nations 
that offer the widest selection in objects of former splen- 
dor as a rule evince the greatest lack of ability to keep 
abreast of present progress. When one considers the 
immense amount of waste involved in gratifying the 
unwise wants of the world it is astonishing that the evil 
effects are not more in evidence than they are. 



52 The Way Out 



The power of appropriation of nature's products is 

common to both man and beast. The divid- 

l erence j n ^ j« ne k e t ween them seems to start where 

and beast ^ ne exhaustion of the naturally prepared 

food supply begins. The beast can go no 
farther and starvation begins its remorseless task of ad- 
justing the numbers to be sustained to the available food 
supply. Animals, with the exception of the few that 
store food, consume the available supply and make no 
provision for future needs. Man, on the contrary, on 
account of his superior intelligence and foresight, not 
only avails himself of the bounty which nature has pre- 
pared but develops the power to facilitate the change of 
matter into desired forms that serve as means of future 
subsistence. He not only consumes the berry but he 
transplants, fertilizes, and cultivates the vine and in- 
creases the quantity of berries. He takes the unavailable 
matter and changes it into such forms as will make it 
capable of being assimilated. The more intelligently 
man assists nature in the transformation of matter the 
more clearly is the differentiation between him and the 
lower animals established. 

In primeval times when man roamed wild, digging 
roots with his fingers and eating the wild berries, there 
was little difference between him and his cousin-german, 
the monkey. When his intelligence, however, had de- 
veloped sufficiently to enable him to harness the falling 
waters and bridle the lightning, thus compelling the 
natural energies to do his bidding, he soon outstripped 
his kinsman. 

Since labor is absolutely essential to augmented pro- 
duction and since this form of production is the distin- 
guishing feature between man and the brute, it becomes 



Productive Labor 53 

the moral duty of man to labor and fulfill 

duty to labor the * aw °^ n * s ^ em S m order that he may- 
rise superior to the brute creation. He who 
violates this law of labor, in the degree that he does so 
must lose those high qualities of mind that obedience to 
it superinduces and become bestial in character. The old 
adage that an idle brain is the devil's workshop is 
founded upon this truth. It follows that he 

Idleness is , , , . , .,, , , 

who ekes out an existence without comply- 

pauperism. . * _.*' 

ing with the law of labor, having the ability 
to conform, is either a robber or a pauper. Either he 
takes that which does not belong to him or lives upon the 
charity of others. 

Cooperative Not only is it man's duty to labor, but he 
labor. must labor effiectively. The penalty for 

both idleness and non-effective labor is want. From the 
premise that the law of being is effective labor, it follows 
that men should labor together when the joint action 
would give more effective results than individual effort. 
The reason for combination is found here. To this law 
all cooperation owes its origin, and so long as it results in 
effectiveness its foundation is indestructible. A success- 
ful effort to destroy it would move the hand of progress 
backward, degrade mankind and destroy the hope of ele- 
vating humanity to that plane of useful achievement 
which its endowments make possible. In 
labor obedience to the law of effectiveness it be- 

comes man's duty to eliminate all ineffective 
labor because it is an economic loss that must react 
upon all. 

Any improvement in machinery or readjustment of 
labor that gives more effective results is in accord with 
the law of man's being and will contribute to his advance- 
ment. In this social laboratory of the world in which 



54 The Way Out 



mankind is engaged in the transformation 
LTrLt ™ 011 of matter from unavailable to available 
labor forms each individual has his task. Yet all 

are definitely and vitally concerned in the 
character and efficiency of each part of the work. Run- 
ning through the whole operation is a common interest 
in the final outcome. This common interest rests upon 
broad ethical grounds. Necessity has driven man to em- 
ploy joint effort because a higher degree of efficiency was 
imperative. 

Effectiveness is the touchstone by which all labor, 
whether individual or collective, must be tested. If labor 
is non-utilitarian in character, or if utilitarian, yet not 
in the highest degree effective on account of deficiency in 
effort or lack of proper organization, it stands condemned 
under the economic law either as a waste of effort or a 
partial waste which inflicts injustice upon society. In 
B1J ,. such case, this labor should be diverted into 

Better adjust- . , . . . . , 

ment of labor P ro P er channels or brought up to the re- 
quired standard of efficiency. Many things 
indicate that there exists an overruling necessity that 
compels man to conform to the requirements of natural 
law. This fact suggests the query whether without this 
compelling necessity social evolution could 

forces ^evJf eVer take plaCe ' K a PP ears P robabl e that 
lution f orward ^ ne numan family has advanced very little 
farther than circumstances have compelled 
it to go. It is not improbable that the creation is moving 
to the fulfillment of a preordained plan which may leave 
to man the restricted choice of following it under the di- 
rection of reason, or being compelled to go to the same 
objective under the lash of a relentless necessity. If this 
assumption be true, it furnishes the reason for the revo- 
lutionary outbursts that take place from time to time, 
bringing about fundamental changes. 



Productive Labor 55 

Necessity forces man to conform to the law of effi- 
ciency, and the more imperative the need the closer the 
conformity. When the stage coach was the method of 
transporting passengers the loss of a few hours was not 
a matter of much importance, but when the great trunk 
lines came, operating under the necessity of making their 
connections at fixed times, it became necessary to count 
the minutes. The merchant at the country crossroads 
may entertain his customers with discussions of current 
affairs, but when he changes his location to the metropolis 
and undertakes to serve the throngs that he finds there he 
comes under the necessity of adopting methods that 
admit of little diversion. 

Combined effort not only makes possible greater effec- 
tiveness but compels it, and the larger the aggregation 
the greater the compulsion. The small band may straggle 
but the large army must move by rule. 

As man is brought into closer relationship, interde- 
pendence grows greater and the need of closer conformity 
to the law of effectiveness becomes impera- 

^nttf* ^ tive * The origin of this increased eff ective- 
oriffin ness * s m ^ ne mm d, hence the more it is en- 

lightened the greater will be the incentive 
to conform; therefore, an enlightened, educated people 
will produce more than the ignorant. The former, realiz- 
ing the benefits to be derived from a labor-saving device 
will quickly adopt it, and will as readily effect a readjust- 
ment of labor if by so doing the greater effectiveness can 
be secured, because they appreciate the fact that in- 
creased production results in the promotion of the gen- 
eral welfare. An ignorant people will refuse such im- 
provements upon the theory that they will decrease the 
amount of labor to be done, thereby depriving the la- 
borers of a part of their opportunity. The former realize 



56 The Way Out 



that production is the desideratum, while the latter place 
the stress upon the opportunity to labor rather than upon 
results to be obtained from it. 

To state the case differently: the difference between 
the man and the brute is the former's power to change 
the form of matter so as to make it available for the sup- 
port of life. Man's power of augmenting production 
comes from his superiority of mind. The greater the 
facility he displays for the accomplishment of the purpose 
the higher he rises above the brute. As his intelligence 
expands he demands a continual elimination of the un- 
necessary, a better adjustment of the productive units, 
and a combination of forces when this is more effective 
than single effort. When these more efficient methods 
are available, making possible the accomplishment of 
greater results in shorter time, it is an economic crime to 
impose this loss upon society. 

By combination all can have the benefits of certain 

results that none can have if the workers continue to act 

individually. The deduction from this is 

fJrmutufi° rt that the laW ° f collective effort is mutual 

benefit effort for mutual benefit. The law of being 

requires that all who are capable of doing so 
shall labor and that they shall do so in the most effective 
manner, combining their efforts whenever such joint 
action will result in greater efficiency. It will be ob- 
served that there is no place in social economy for the 
idler and shirker. He is a social outcast against whom 
compulsory process would be justifiable. 

Common The protection and support of the depend- 

responsibihties en ^ classes, insuring the merciful care of the 
weak, afflicted and aged, and the perpetua- 
tion of the race, are duties laid upon the shoulders of the 
workers. When these duties have been performed, the 



Productive Labor 57 

ethical principle requires that each worker shall receive 
products in proportion to his contribution, in other 
words, that he shall have as his individual part that 
which remains of his own production after meeting his 
communal responsibilities. It may be noted that there 
exists no social obligation to support those 
who are capable of self support, hence those 
who live upon incomes and do not work enough to earn 
what they consume put themselves in the dependent class 
and are in an economic sense charges upon society even 
to a greater extent than the inmates of a charitable insti- 
tution, in that the amount consumed by the former is 
larger than that devoted to the support of the latter. 

In order to reach a high standard of efficiency in pro- 
duction it is necessary, in addition to efficient labor, to 
„ T „ , , , have a well balanced production, that is to 

Well balanced ., . .. . , ... . . 

production sa ^' ^ ^ ^ mus ^ correspond with social 
needs. When the amount produced exceeds 
the amount necessary to satisfy the current wants and 
provide against reasonable contingencies it involves the 
expenditure of labor for unnecessary things which, 
though utilitarian of themselves, for the nonce must be 
placed in the non-utilitarian class. If the cost of the de- 
terioration and the storage of these excess productions 
until the time comes for their consumption exceeds the 
cost of new production, the excess cost represents waste 
of effort. It will be seen, then, that man is under the ne- 
cessity of exercising judgment in the quantity of produc- 
tion of the different products, if the proper balance is to 
be preserved, and the highest efficiency reached. It is 
entirely probable that society may from time to time 
through defective judgment produce certain articles in 
excess of need and thereby disturb the economic balance, 
but it is entirely improbable that man, if his efforts are 



58 The Way Out 



properly directed, will ever produce more than he can 
consume, for the reason that his wants will increase in 
the proportion that goods are produced to satisfy them. 
The cry of over-production is therefore misleading. It 
generally denotes either an unbalanced production or, 
what is more probable, an under consumption superin- 
duced by faulty methods of distribution or division of 
benefits. 

The change of ratio in the exchange value of the differ- 
ent products is the method of bringing production into 
proper balance. That which is under-produced rises in 
value while that which is over-produced falls in value, the 
high value stimulating production and decreasing use 
and the low value repressing production and increasing 
use. 



CHAPTER IV. 

CAPITALISM. 

Capital. The term capital will be employed to mean 

fixed investments, other than land, and the production 
that is available for use out of which loans and invest- 
ments are made. 

Capitalism Capitalism is the doctrine that capital is 
defined. entitled to a return for its use. Expressed 

differently, capitalism insists that the owner of capital 
shall be insured the return of the full amount of the cap- 
ital loaned or used, and in addition be given a considera- 
tion for the use of it. The soundness of the capitalist 
system depends upon the validity of the claim for pay for 

the use of capital. If capital is entitled to a 

<m users re t ur n for its use, the doctrine of capitalism 

pay hire? rests upon an ethical foundation, leaving 

only the problem of proper regulation and 
administration to prevent abuses. On the other hand, if 
capital is entitled to no return for use, all payments for 
such use are necessarily inethical. In such case the cap- 
italist system must exist on sufferance and should be dis- 
placed when and to the extent that one approximating 
more closely the ethical principle can be substituted for it. 

The questions at issue are : 

First — Is capitalism ethically justified? 

Second — If capitalism is unsound in principle, what 
system more ethical in its basic principles can be devised 
to take its place? 

59 



60 The Way Out 



As cooperation increased, necessitating division and 
specialization of labor, the need ever grew 
capital. greater for the aggregation of capital to be 

used for social purpose. When the unit en- 
gaged in social service is small, the individual conducting 
it may be able to furnish the necessary capital out of his 
own savings, or by associating other workers with him, 
get the use of their capital and services. So long as this 
method suffices to furnish sufficient capital, 
pnva e ^ e enterprise does not necessarily belong to 

business not . , . . . . 

capitalistic "ie ca P 1 talist system, since it can be con- 
ducted indefinitely, carrying only a charge 
for insurance and actual labor service. When the units 
increase in size it becomes imperative that the surplus 
capital of others shall be aggregated and employed in con- 
ducting the larger operation. The first method for pro- 
viding this increased capital was partnership, under 
which two or more individuals combined their capitals 
for a given purpose. So long as the contributors of the 
capital were the actual workers in the conduct of the op- 
eration the process was fairly simple, but when the need 
for additional capital became still more urgent, a method 
had to be provided by which the capital of workers other 
than those directly employed could be attracted to the 
„ . operation. The inducement held out to the 

Capitalism. . , , . » . « 

investors was the promise 01 an increase 01 
their capital, or, stated differently, the return of the cap- 
ital itself and, in addition, payment of an interest for the 
use of it. This point marks the origin of capitalism. 

The inducement offered the investor, or rate of hire for 
the capital, must of course bear a very close relation to 
the degree of supposed risk attending the conduct of the 
business. 



Capitalism 61 



These contributions to capital take various forms : gen- 
eral partnership, special partnership, stock interest, com- 
mon or preferred, bonds, notes, and open accounts. All 
contributions are made with the expectation of getting a 
return, either from a division of the profits of the opera- 
tion or a fixed return, such as limited dividends or in- 
terest. As already pointed out, the business conducted 
by those furnishing all the capital required out of their 
own savings can continue indefinitely, adding only so 
much to the price as may be necessary to cover expenses, 
including in them a fair consideration for the personal 
services of the partners. The increase of capital to take 
care of the growth of the business will in such case be 
limited to the amount that the partners will be able to 
save out of their compensation for services. If more than 
this is required, it will be necessary either to apply the 
cooperative principle more broadly or to adopt the profit 
principle, increasing the charge for the services to yield 
either a profit that will swell the capital fund, or enable 
the partners to pay the hire of outside capital. The thing 
_ to be impressed here is that the principle 

Two systems L ■, 

contrasted. changes, and capitalism or some other 
method of aggregation becomes necessary 
whenever the business requires more capital than the 
savings of those actually employed in the particular oper- 
ation furnish. If two small units, the workers in one of 
them furnishing the necessary capital while the other 
hires it, are both doing the same amount of business with 
equal efficiency, it is patent that the one hiring its capital 
must either pay a lower wage for services or suffer a 
diminution of capital. 

It is possible that the large unit with a larger volume 
of business can effect economic savings sufficient to cover 
the hire of capital and thus be able to serve the public 



62 The Way Out 



at less cost than the small unit, under no charge for the 
use of capital. The employment, then, of the profit prin- 
ciple, if it is the only means by which the larger and more 
effective operation can be obtained, may result in cheaper 
and better service than if the small unit system had con- 
tinued. It is upon this assumption that the displacement 
of the small units by the large is justified. It will be 
noted, however, that the comparison in this case is be- 
tween unequal things, and that the more favorable show- 
ing of the large unit employing the profit principle as 
against the smaller units operating under the service 
principle does not determine the former's right to exist 
except as an expedient — as a choice between the less effi- 
cient and the more efficient. The final test must be be- 
tween units of equal size, the one function- 
The service ^^ un( j er ^ e serv ice principle, the other 

Tindies under the profit principle, and the right to 

live accorded to that which proves to be the 
more efficient social instrument. It is fatuous to claim 
that the benefits derived from larger and more efficient 
production are the results of capitalism. The invention 
of machinery, increasing production and expediting 
transportation, was the primary cause of the improve- 
ment over past periods. The aggregation of surplus cap- 
ital was the essential thing to be accomplished in order to 
make these inventions practicable. The ignorance of 
society made it impossible in that period to devise a 
proper method for gathering the necessary capital, leav- 
ing it to the more astute individuals to adopt one, and in 
doing so they very naturally adopted capitalism, which 
functioned, not in the interest of the ignorant mass, but 
. in that of the few responsible for its exist- 

Capitalism a ~ .. ,. ,, . t ,-, i 

method oni ence - Capitalism, then, is only a method, 

not a cause, which necessarily depends upon 

the existence of a special privilege that operates to the 



Capitalism 63 



advantage of its possessors and to the disadvantage of an 
ignorant society which permits it to remain. Capital is 
vitally necessary, but capitalism is not, because it is by 
no means the only method of aggregating capital. 

Necessity The law of efficient labor requires effective 

for capital. effort of all workers, their allotment to the 
spheres in which they can be most productive, and the 
proper division and specialization of work. To accom- 
plish these purposes the aggregation of the requisite 
amount of capital becomes necessary so that buildings, 
equipment, machinery, and working capital may be pro- 
vided. 

The larger the unit of production becomes, the greater 

the opportunity to specialize the work and reduce the cost 

of manufacture. There is, however, a limit beyond which 

the further increase of the size of the unit 

imi °. does not effect an economic saving, but oc- 

economic . . x „ ._ . . 

growth casions a loss. If the expansion is per- 

mitted to go so far, it cannot be sustained 
except by imposing a tax upon the public, either in the 
form of monopolistic exaction or a subsidy from society. 
As the economic unit increases in size, the amount of 
capital employed in it must also increase. So long as this 
increase in size results in more efficient pro- 
ora o iga- d uc tion, it is clearly in the interest of society 
beneficial use ^hat ^ snou ^ take place, and therefore those 
of capital. wno have surplus capital are under moral 

obligation to allow the beneficial use of it in 
the public interest. The claim of society upon the owner 
of surplus capital for its use in the public interest is also 
in full accord with the owner's self-interest. Practically 
all capital requires constant renewal, and therefore the 
owner must reproduce it himself, permit others to do it, 
or lose it. If he has wheat in excess of his immediate 



64 The Way Out 



need, it must be stored and protected against rats, 
weevil, fire, thieves, etc. If society assumes these risks, 
assures the individual of its safe return, undertakes to 
reproduce the wheat and to furnish the owner a supply 
of new wheat each year equal in quantity to the amount 
loaned, it has clearly done him a valuable service. 

illustration of Let us suppose A, B, and C acted individ- 
the principle ually and produced by the time they reached 
o conserva ion. thirty years of age enough wheat to supply 
their needs until they are eighty years old, and they de- 
sire to discontinue its production. Each stores his stock 
of wheat. A knows nothing of the law that requires the 
constant renewal of production, or of the risks incident 
to its preservation, hence makes no provision against 
these contingencies. He continues eating from his stock, 
and finds in a few years at most that what is left of it is 
no longer edible, or that all has been destroyed or stolen. 
He is reduced to the necessity of beginning again the pro- 
duction of wheat, or starving. His provision against 
future need was unwisely made and therefore proved a 
failure. 

B was more intelligent. He understood the law of con- 
servation and the risks involved, so he only kept so much 
wheat as he needed for the year's consumption and 
loaned the rest to responsible parties with the under- 
standing that they would return him an equal quantity 
of new wheat the succeeding year. Out of the new wheat 
returned, he would each year reserve his requirements 
and loan the remainder. His stock was reduced each 
year only to the extent that he consumed it. He had 
wheat until he was eighty years old, exhausting the 
supply at that time just as had been contemplated in the 
original calculation. 



Capitalism 65 



C was equally as intelligent as B, but more selfish. 
He recognized that some of his neighbors were under a 
necessity to borrow wheat and he pursued the same 
method as B, except that he took advantage of the need 
and exacted that they should return him each year new 
wheat in equal quantity to what they had borrowed and 
six bushels extra for each hundred borrowed, as pay for 
the use of the wheat. It developed that this extra six 
bushels per hundred furnished enough for C's consump- 
tion, hence when he came to die at eighty he had as much 
wheat as he had when he ceased to produce it fifty years 
before. In other words, he had lived for half a century 
upon the product of his neighbors' labor, not because they 
wanted him to have it, but because they could not help it. 

If, then, the practice of taking from the borrower in 
excess of the amount borrowed is to be justified, it must 
be done upon other than ethical grounds. Its defenders 
are reduced to the doubtful expedient of defending an 
evil that should only exist because it pre- 
Capitaiism vents a greater one. This plea necessarily 

lacks moral . -,i >, •> • ■,• .• ,, , . . 

foundation carries with it by implication the admission 
that the thing defended should be tolerated 
only so long as a better method is not available. Capi- 
talism, to maintain its right to exist, is reduced to the 
necessity of establishing its superior effectiveness against 
all competing methods, and is by the facts of the case de- 
barred from appeal for support on moral grounds. 

The owner of capital, in conforming to the moral obli- 
gation to permit the use of his surplus, is acting in accord 
with enlightened self-interest. If compelled to accept the 
alternative of keeping his capital as A did, he could better 
afford to pay the borrower something to take it upon the 
terms which B made. If society, taking advantage of 
the necessities of the owners of surplus capital, should 
place them under the same conditions that C imposed 



66 The Way Out 



upon borrowers, they, even under such a handicap, would 
still be acting in accord with their best interest to allow 
the use of this surplus, since renewal and the insurance 
charge against risk might be worth more than the charge 
exacted. In fact, in practical life this actually obtains, 
since owners of property do pay insurance companies for 
assuming limited risks. 

Benefits result- The loan of this surplus capital enables so- 
mg from use ciety to improve its industrial and financial 
o capi a . mechanism and makes possible increased 

production at less cost, which results in a larger store of 
wealth that enables all, the loaner included, to enjoy a 
standard of living that would otherwise be impossible. 
The advantage of the aggregation and use of surplus 
capital over its non-use is so obvious that it will be gen- 
erally admitted and even the penalizing of its use, as a 
charge for capital certainly does, is not a sufficient deter- 
rent to overcome the advantages. This charge reflected 
in the percentage of profits, obtaining at any given time, 
must of necessity be something less than the profits to be 
derived from the use of capital, or the borrower must at 
least think so, as he would not willingly incur a loss. 
Should this occur, cessation of borrowing 
Effect of follows and the interest or profit percentage 

rates in ^ ^ a ^ s un ^ the borrower again becomes con- 

vinced that the benefits of use will be 
greater than the cost of it. In practice, then, the rule 
seems to be to put on all the business will bear and make 
the exaction whatever the necessity of the case will per- 
mit. The intelligent owner, in arriving at the maximum 
charge for the use of capital, will no doubt consider, not 
only the amount than can be momentarily gotten, but the 
effect that the rate of return will have upon future bus- 



Capitalism 67 



iness and moderate the charge to the extent that may be 
necessary to insure the continuity of business. 

Pay for capital The case of C illustrates that the pay ex- 
is taken from acted for capital comes out of the product of 

the workers. j ab()r dme by otherg than the l oaner . It 

must be remembered that the principle of self-interest 
does not admit a custom that continually calls upon one 
to deliver to another, without consideration, a part of his 
product. If such a custom obtains, the loser submits to 
it, not because he desires to do so but be- 
an^exaction 1 & cause ne c ann ot help it. The controlling 
principle of self-interest will demand an 
equitable exchange. If the mind force and the ne- 
cessity of the traders are equal, the exchange of pro- 
ducts between them will take place upon the basis 
of equal value, therefore any transaction that gives 
to one more than his fair part, as a general rule, will be 
found to rest upon either ignorance or necessity. None 
will work for two dollars per day when he knows that his 
labor is worth four dollars, unless he is unable to help 
himself. The excess taken inethically either as an in- 
terest or profit charge, will usually when analyzed be 
found to consist of over-charge for labor, superintend- 
ence, interest or excessive insurance. If A and B ex- 
change products upon equal terms, neither 

Advantage . ° . r j • i * *u • 

in exchange 1S ™ e ncner > expressed in value, for having 
traded. The advantage to both is in having 
by exchange the use of two different products, whereas 
without the exchange each could have only one. If A 
trades his product to B, receiving more in return than he 
gives, he becomes richer and B poorer to the extent of 
the difference. It is often claimed that the owner should 
receive a consideration for loaning his surplus to another 
because of the deprivation he undergoes. If he can use 



68 The Way Out 



it advantageously himself there appears to be no valid 
reason why he should loan it at all. If there is only one 
tool why should the owner deprive himself of the instru- 
ment unless the borrower can use it more efficiently? In 
such a case the owner becomes free to engage in some 
other employment in which he may be more proficient. 
Society would be benefited, and each of the parties would 
be better off because of the transaction. If the borrower 
of the tool returned it in a condition comparable to that 
which existed when he borrowed it, there would seem to 
be no ground for claim for pay for its use. If, then, the 
mutual and social benefits arising from a better use of 
the tool, which the owner himself could use, justify the 
loaning of the same without charge, what is to be said of 
that which the owner cannot use at all? In such case the 
owner has a surplus that he cannot employ 
Lender and an( j j g d e p en( j en t U p n others to preserve it 

mutually against time, accident, and spoliation, and 

benefited. ^ ne can l° an ft safely he receives a benefi- 

cial service. He confers no more than he 
receives, hence has no ethical ground for a claim for extra 
remuneration. 

Insurance The creation of facilities for larger and 

charge more economical production, and the pro- 

justified. vision of the means of easier transportation 

and transmission are all dependent upon the existence 
and use of surplus capital. If such things are in accord 
with utility, the capital expended is more than repaid in 
the greater production and better distribution they su- 
perinduce. If these things are done under private initia- 
tive, the entrepreneurs as well as the owners of the cap- 
ital must take the risk of the utility or non-utility of the 
work and they of necessity must take account of the 
probable risk involved and make the rate for the use of 



Capitalism 69 



capital higher to cover this risk. If the risk is under- 
estimated, the entrepreneur loses until his margin is ex- 
hausted and the owner of the capital loses the rest. If 
the work is one of utility, the charge for insurance is 
eventually transferred to society in the form of charges 
for services. If this insurance charge is correctly laid 
it will only cover losses and therefore yield no net return 
on capital. If capital is entitled, as is conceded, to be 
protected against loss, it follows that sound ethics re- 
quires that the charge be reduced when it becomes appar- 
ent to the lender that it is in excess of that necessary to 
cover losses. This insurance fund is not the property of 
the owner of the capital. It is a contribution from society 
to guarantee the safety of the individual's loan. The 
ground upon which this insurance charge 
ocie ymus rests is that society, or such members of so- 

assume the . . , ... n 

Tisk ciety as possess surplus capital, are under a 

moral obligation to furnish it for beneficial 
use, and society as a whole is under obligation to furnish 
such organization as may be necessary to insure the ag- 
gregation and safety of capital. In such case, if it is used 
in a non-utilitarian way either by design or on account 
of defective judgment the result is a loss that society 
must bear. If society makes no such provision and the 
individual must on his own initiative undertake to do for 
society that which it should have done for itself, it must 
submit to such losses as are incident to its own failure to 
protect itself. 

No moral This, however, does not mean that the indi- 

nght to ex- vidual has the moral right to exploit society, 
p 01 socie y. jj e ma y an( j g ] 10U i ( j p rov id e a safety fund, 

charging profit for the purpose. He, in the event of the 
failure of society to provide the capital necessary to in- 
sure beneficial development, may tax them in the form of 



70 The Way Out 



profit to amass a fund to pay hire on capital or aggregate 
the capital itself by a profit charge, but thus compelling 
society to do its duty to aggregate capital by no means 
transfers to him the title to such capital. There is no 
legitimate way by which one can acquire title to that 
which belongs to another other than by voluntary gift or 
exchange of equal value for it. This forcible method of 
gathering capital, justified by the failure or 

j. rust relation. i /» • j i -i *j i j p 

refusal of society to do its duty, coniers no 
title but creates a trust relation between the gatherer of 
the capital and the public from whom he has taken it. 
The omission to consider the trust character of this ac- 
cumulation leads to many unfortunate results. 

In times of commercial prosperity when the insurance 
fund grows rapidly, many appropriate it and raise the 
standard of living. Commercial depression follows, and 
having consumed or greatly impaired the protective 
fund, they become wrecked. It may be said, too, that so 
long as capital is employed in the production of wealth, 
the mere claim of ownership does not materially injure 
society except in so far as the possession of this trust 
fund may give opportunity for the abuse of it. The most 
serious danger lies in the temptation which 
harmful suc ^ P ossess i° n offers to the trustee to be- 

come wasteful or to abuse the power which 
the control of great wealth confers. If the trusteeship 
can be justified upon the grounds of society's insufficiency 
it must be remembered that the trustee's 

^tiontohis 11 " Ward Sh0Uld be the ° bjeCt ° f hlS unfailin £ 
ward care. He is not only under the obligation to 

conserve and use wisely the trust estate, but 
is likewise under the most sacred and imperative duty to 
employ every available means to restore the ward to nor- 
mality so that he can assume full possession and manage- 
ment of his own estate. 



Capitalism 71 



Abuse of the The insurance fund is an essential feature 
insurance f capitalism, and by its abuse the most of 

fund. ^iq unwarranted accumulations of wealth 

are accomplished. In actual practice, capital, when the 
insurance feature is eliminated, receives a very small 
return. Note the low rate when the security is con- 
sidered safe. The safer the bond the lower the interest 
. rate is the rule, which leads to the conclu- 

charge' s * on ^ na t ^ ^ ne sa ^ e ty of the investment 

were absolute there would and should be no 
return. In such case, the owner of the capital would 
always have at his command all the surplus he had saved 
without risk of diminution except to the extent that he 
himself consumed it. Under this condition the producer 
of wealth could enjoy his savings so long as they lasted, 
but would be debarred from converting himself into a 
vampire to suck the life-blood of society. 

If the social use of capital upon which improvement in 
production and transportation depends could be pre- 
served under a system that aggregated free capital it 
would tend to increase the fund of surplus 
Just distnbu- capital, since it is a well known weakness of 
man to become more careless and extrava- 

duces economy . ... . , 

in expendi- £ ant in expenditure as he is able to make it 
tare. ou t of the labors of others. "Easy come, 

easy go," is proverbial, therefore, if one's 
expenditures are confined to his own productions, greater 
conformity to the law of utility follows, and under the 
latter circumstances we should have fewer of those twin 
evils of society among us, the wastef ully rich and the mis- 
erably poor. The insurance or profit and 
ro s an j ogg accoun j. w h en properly adjusted will 

losses should . , _ . . £ 

balance. balance. Ii extra profits are set aside to 

cover losses it is manifest that when the 

losses are paid there should be nothing left. It is, of 



72 The Way Out 



course, understood that no reference is here made to such 
proper percentage as the banker or broker may charge to 
cover wages and actual service, that being an entirely 
permissible administrative expense. 

All charges made by the commercial classes may be 
said to be composed of wages, insurance, and a trust 
fund out of which the hire of capital is paid and a surplus 
created to furnish the necessary capital to provide for the 
expansion and growth of the business. When a business 
accumulates capital rapidly it is usually due to an exces- 
sive insurance charge. It is then said to be a profitable 
business. If, on the other hand, it loses capital, it is proof 
that the insurance charge is too small and it is then said 
to be unprofitable. The system of capitalism, as has 
already been explained, rests upon profit. That is to say, 
it must offer a reward for the aggregation of capital in 
the form of a return for its use and it must make the in- 
surance charge too high in order that it may yield a suf- 
ficient amount in excess of cost, in other words, a surplus 
fund to provide the necessary capital to take care of the 
growth of the enterprise. The excess charges must of 
necessity be collected under duress. Among others, the 
devices employed to effect the desired results may be men- 
tioned the following : first, the employment of workers at 
less than the correct wage ; second, the sale of the finished 
product at a higher price than would obtain if the system 
of distribution were ethical. In such case, the excess 
above the proper charge is collected on account of either 
the ignorance or the necessitous circumstances of the 
buyer or perhaps both. 

The story of Dick Whittington's cat is familiar. It has 
come down to us as an example of what Dame Fortune 
may do for us. Parenthetically it may be observed that 
Dame Fortune is the patron goddess of robbers. The 
morals of the story do not commend it, and it doubtless 



Capitalism 73 



would have been buried in oblivion years ago if it had 
not been a faithful reflex of human nature in its unde- 
veloped state. 

Wealth is It is difficult for the ordinary mind to con- 

power, ceive of greatness divorced from material 

things, hence the possession of great wealth is to many 
conclusive proof of the possessor's prowess. It matters 
„ , , . not so much that he may have disregarded 

Man's worship . . . , . ., . . . , ° . . 

of the material ever y ethical consideration in the acquisi- 
tion of this wealth, the material exponent is 
alone sufficient to satisfy the many. As proof that this 
exponent is the guiding star it may be observed that when 
one unfavorable circumstance deprives the rich man of 
his riches he falls at once to the common level. Dick 
Whittington, the errand boy, sleeping in the garret, re- 
ceiving the cuffs of the empress of the kitchen, was a 
person of no particular importance, but the Hon. Richard 
Whittington, Lord Mayor of London by virtue of an act 
of robbery perpetrated against an African savage, was 
a personage to whom the common herd was proud to 
render homage. Dick Whittington still lives and may be 
seen in miniature in every mart. He left an enduring 
memorial as evidence of his possession of a keen appre- 
ciation of the appropriate in the form of Newgate prison, 
which he built for the accommodation and delectation of 
those, who like himself, would become the beneficiaries of 
the system that undertakes to get something for nothing. 
His principle is subscribed to and his method practiced by 
almost every one from the gold brick vender to the mer- 
chant prince. The merchant's private cost mark, the air 
of secrecy and so-called privacy that pervades the busi- 
ness atmosphere come from the desire to withhold 
knowledge that would enable the public to arrive at a 
correct idea of a fair ratio of exchange. The advance 



74 The Way Out 



agent of a superior civilization who buys the land of the 
ignorant savage for a few trinkets feels the same satis- 
faction that falls to the share of the exploiter who, giving 
a trifle in return, takes oil wells and coal mines from an 
ignorant populace. The wily horse trader who exchanges 
the broken down, worthless animal for one that is sound 
of limb, is considered disreputable. If he applies the 
same principles and cheats the community out of a val- 
uable franchise which he operates, and enriches himself 
out of all proportion to the services rendered, he becomes 
a worthy example to all the budding Dick Whittingtons 
of the neighborhood. 

The fool and Even the Almighty can do nothing for the 
his folly. f 00 i except to give him over to his folly. 

When the Israelites cried for a king, He told them the 
consequences, but it did not deter them from making the 
experiment. Little can be done to mitigate the effects of 
evil causes. They will likely remain to serve as cruel mas- 
ters in the school of bitter experience, the institution re- 
served for the instruction of that large class that will 
learn in no other. The remedy lies, not so much in help- 
ing them to avoid penalties, as in the dissipation of their 
ignorance. 

The development of mind force by practical education 
is the panacea for such ills. Along with increased intel- 
ligence goes the public conscience, which will enforce only 
so much of the moral law as the common intelligence has 
perceived. If both parties to the exchange are ignorant 
there is no moral responsibility. If A knows B's product 
to be double the value of his own, and exchanges one for 
the other, B's consent is based upon a lack of knowledge 

which enables A to get one-half of B's pro- 
sibiiity ^ uc ^ ^ or n °thing. The question of morality 

hinges upon A's motive. If he intends to 



Capitalism 75 



take advantage of B's ignorance, he is quite as immoral 
as he would be were he to take the same amount while 

B slept. The purpose underlying the use of 
purpose. one's force should be honest service so that 

the world's work might be done in such an 
effective manner as to insure that the laborer would re- 
ceive his fair reward, and that the general good would be 
advanced. In such conception of duty there is no trace 
of desire to gather where one has not sown nor wish to 
over-reach a neighbor. The controlling motive in this 
case would be to do unto others as we would have them do 
unto us. 

Forceful It is a reprehensible practice to employ force 

exactions ^ com p e i one to make exchanges at an un- 

y< just ratio. If A meets B on the highway 

and under threat of harm forces him to exchange a horse 
worth fifty dollars for a cow worth twenty-five dollars, 
the law comes to B's rescue and holds A guilty of robbery. 
B may have been willing to exchange his horse for the 
cow, provided he received other things sufficient in value 
to equal the difference. A has bread and B has other 
products and must have bread. A has a monopoly of 
bread and will not exchange with B except upon the ratio 
of double value of bread. B knows that A's price is ex- 
tortionate but he must have the article, makes the ex- 
change and receives only one-half of the value of his own 
products in bread. What difference is there either in the 
principle or in the practical results of the two trans- 
actions? In both cases the necessitous were compelled to 
surrender one-half of their values for which they received 
nothing in return. It is self-evident that the employment 
of any force with the motive of getting the product of 
another for less than its full value is robbery. It does 
not alter the morals of the case if this is done by taking 



76 The Way Out 



advantage of a defective economic system, by monopolis- 
tic privileges conferred by a government, or by the enact- 
ment of protective laws that enable the robber to ply his 
trade with more success. 

Saving by it is claimed that the saving of capital is the 

self-denial. result of self-denial. In some cases this 
may be true. It is nearer the truth, however, to say that 
much of the surplus capital devoted to productive pur- 
poses is, in the present state of social development, the 
result of enforced abstinence. It is not intended to say 
that this involuntary contribution to surplus capital is 
the only means by which the results desired can be accom- 
plished, nor is it even insisted that this method of ac- 
cumulation is desirable. The fact that it is done does not 
necessarily prove that the same result could not be 
reached by a process that would be more in accord with 
ethical considerations and individual rights. 

Carnegie on It has been contended, notably by Andrew 
trusteeship. Carnegie, that it is productive of greater 
good to take the surplus wealth of the people in the form 
of profits, vesting the ownership or trustee management 
in the hands of the few than to leave it in the hands of 
its rightful owners. This assumption must necessarily 
be predicated upon the incompetency of the social body to 
develop proper organization under which its functions 
would be efficiently performed. In other words, this 
theory claims that it would be better in the public in- 
terest to take away from the individuals a part of what 
belonged to them and use it reproductively, justifying 
the course by assuming that the rightful owners lack ca- 
pacity to devote it to beneficial use. It may be that man- 
ufacture, transportation, and distribution have advanced 
more rapidly under the system of spoliation with its dis- 



Capitalism 77 



regard of ethical considerations than would have been the 
case had a more just system prevailed, but even if this is 
admitted, it does not follow that the present system is jus- 
tified or even justifiable. Even if slower as regards these 
things, it is conceivable that the progress of civilization 
might have been better balanced and might have made 
a greater average advance if the entire economic system 
had been brought into closer conformity to moral law. 

It is exceedingly doubtful if the overlordship of the few 
has ever resulted in giving benefits that would compen- 
sate for the deterioration which follows in the subject of 
, ,. ., , its spoliations. No amount of creature com- 

Individual „ .« , » ^ i » 

independence * or ts W1 ^ ever compensate ior the loss 01 
those virile qualities of manhood which are 
strengthened and developed by the knowledge of the fact 
that the laborer can feel assured that he will receive the 
full measure of the reward of his efforts, and that he, as 
an essential factor in the government and direction of the 
world's work, must rely upon himself for the accomplish- 
ment of social progress. The latter method would de- 
velop men, the former, slaves. 

Willingness The willingness of the producer to forego 
to save. present expenditure that he may have the 

use of his production at some future time, rests upon 
grounds as multifarious as the ambitions and purposes of 
the individual members of the human family. One is 
born a miser, he saves merely for the satisfaction and 
gratification of possessing the savings without much re- 
gard to their use. He will go in rags, half starve and 
even beg that he may acquire something to put in store. 

Another saves because he fears the depend- 
savine enc ^ an( * deprivation that poverty brings 

and he willingly denies himself present 
pleasures that he may avoid future pain. Another saves 



78 The Way Out 



because observation has taught him that the results of 
prudence and foresight which prompt the accumulation 
of a sufficient surplus during man's productive period to 
provide against the wants that necessarily come in his 
non-productive period, are altogether good. Another 
saves that he may provide funds to rear a family, giving 
its members such opportunity for education and develop- 
ment as may be necessary to equip them for useful citi- 
zenship. Others still of a more altruistic disposition will 
work and save in order to create a reserve that will en- 
able them to put it to beneficial use in doing things for 
social benefit, the importance of which is not sufficiently 
appreciated by society to induce it either to arrange for 
the work or pay for it when it is done. Others desire to 
accumulate in order to acquire the power which wealth 
brings and find a sufficient compensation for their efforts 
in this direction in the exercise of the influence that the 
rich have over the poor. 

The controlling motives for saving are by no means the 
same in different individuals nor of equal merit, some 
being worthy and others despicable. It does not appear 
unreasonable that the desire for ownership of the saving 
itself, even if it could not be hired out, is sufficient to fur- 
nish incentive to develop normally the saving impulse. It 
is beyond question that security in the possession of the 
laborer's product is an indispensible element in the pro- 
motion of both production and saving. It is 
a ety an plainly for this reason that a country with a 

mote saving stable, orderly government insuring justice 
to its citizens will develop a national wealth 
out of all proportion to one which does not afford such 
protection to its citizens. It may be said, too, in this con- 



Capitalism 79 



nection, that the return of interest paid on 
• t r Vfh capital is lowest in the well governed coun- 
measure of so- tr y and ni g nest m tne badly governed. It 
cial progress. ma y be said further that the return on capi- 
tal rises as civilization falls. There is no 
more certain index of the rise or fall of social progress 
than the interest returned or percentage of profit that 
obtains at any given time. God save the country in which 
Shylock prospers most. 

If the hire of capital is a legitimate earning inuring to 
the owner of it, it could only add an additional incentive 
to save to the extent of the income from this source and 
therefore could not by any stretch of the imagination be 
said to furnish a larger consideration to save. It would 
indeed be a foolish possessor who would not forego the in- 
terest to save the principal. If, however, this return on 
capital, this additional incentive to save, is 
Return on no ^ a p r0 p er charge but is an unjustifiable 

capital stimu- ,. ,-, re • j.j? -j. t, j 

' exaction, the effect must of necessity be de- 

depresses the' cidedly detrimental to the moral as well as 
many. the material development of society. In 

this case it would be an involuntary contri- 
bution from those who had earned to those who had not, 
and since the beneficiaries are in smaller numbers than 
those suffering the deprivation, the stimulus given to the 
former would in no measure compensate for the depriva- 
tion experienced by the latter, therefore a net loss would 
result. It is conceded that the existence of an organiza- 
tion for the purpose of aggregating the surplus savings 
of a country, even though this organization be inethical 
in its operation, is productive of far greater social benefit 
than could be realized if no organization for this purpose 



80 The Way Out 



existed. If each individual were left to take 
Capitalistic care Q £ ^.g own sav j n g S an( j ^ su bject them 

better than ^° use > ^ ne benefits of cooperation could not 
none> be obtained. The development of the capi- 

talist system came, then, as the only prac- 
ticable method available at that time by which coopera- 
tive action could be secured. With all its faults and short- 
comings it was better than that which existed before it 
came into existence and it will likely be retained until the 
public mind conceives a still more efficient system. 

Saving an Under any system the individual, so long as 

instinct. h e f ee ] s a reasonable assurance that he will 

be protected in the possession and use of his product, will 
strive to create a surplus because the desire to provide 
against future need is a natural instinct developed under 
the particular necessity of one's environment, and it will 
assert itself even if there is no inducement other than 
that which the saving itself offers. Man cultivates his 
crops, reaps and stores them in due season for consump- 
tion during the periods of non-production even though he 
is assured that no premium other than the use of the pro- 
ducts themselves will be given him. The knowledge of 
the necessity of saving is the main reason for its practice. 
The more intelligent the people, the greater 

Intelligence w ^ ^ e ^ u; ^ Q p ro( j uce an( J savej hence 

saving we ^ n( * ^ ne l° wes t production, the least con- 

sumption, and the greatest poverty in ignor- 
ant communities, and the largest production, the most 
liberal consumption and greatest amount of savings in 
the countries having the highest moral and intellectual 
development. 



Capitalism 81 



Capitalism en- Capitalism, then, as a social instrument, 
titled to live w jjj ^ e entitled to live only so long as it may 
iinti a etter demonstrate its superiority over any other 
found available method of accomplishing the de- 

sired results. If a better system is found, 
which will aggregate capital at less expense and effect a 
more beneficial use of it, eliminating the opportunity of 
the exploiter to transfer to himself the property of others 
without giving a fair return for it, it will displace cap- 
italism, just as the less efficient methods of transporta- 
tion have disappeared before those of greater efficiency. 
Capitalism, and private monopoly that necessarily re- 
sults from the development of the principle, have made 
themselves tolerable on account of their ability to effect 
economic savings and to promote increased production 
through the introduction of improved machinery. It has 
been able to take its toll, and out of the increased produc- 
tion leave the portion of labor larger than it could have 
been had these improvements not taken place. The 
efforts of large corporations to encourage 
ncrease more efficient production have been produc- 

beneficiai. ^ive °^ highly beneficial results. It fur- 

nishes a splendid example of an intelligent 
selfishness that seeks to serve itself by serving others. 
Admitting its many good points and the permanent bene- 
fits that capitalism has made available to society, the con- 
viction still remains that its fundamental principle does 
not square with the moral law and that its incentives do 
not lead to the development of moral character. Lacking 
the moral foundation upon which all permanent institu- 
tions must depend for continuity of life, it 

Capitalism i i -• j , 

k i can on ly De regarded as a passing stage in 
foundation human progress that will disappear as the 
perceptions of man grow clearer and the ne- 
cessity for closer conformity to ethical consideration and 
principle become more urgent. 



82 The Way Out 



Capitalism pays hire for the use of capital and its pro- 
tagonists claim that this practice not only aggregates the 
surplus but offers an incentive for increased production 
and saving. As already explained, the capital that is 
saved and gathered to be used to produce new capital, 
that is to say, used productively, must of necessity be con- 
sumed in the process of reproduction just as the wheat 
that is sown must germinate and become consumed in the 
process of making new wheat. The expenses of the op- 
eration, the hire of capital and the labor must come out 
of the new production. If the new production yields less 
than the sum of these charges, to the extent of this differ- 
ence the entrepreneur will have as his share when the 
new crop is garnered less capital than he had at the start. 
If he borrows all the capital used he will be unable to pay 
all of the debt he contracts. In other words, he will be 
insolvent. If the operation is successful and yields a sum 
in excess of the original capital used, the amount paid for 
its hire and its labor expense, the entrepreneur will be 
the gainer to the extent of the amount of this excess. 

Hence, it is the borrower who takes the pri- 
primarv risk mary risk of loss. The risk of the loaner is 

secondary in that he only sustains a loss 
after the ability of the borrower to pay it has been ex- 
hausted. If in addition to the amount necessary to insure 
the entrepreneur against loss, he must include a charge 
for the use of capital, this can only be secured out of the 
sum produced, hence the remainder left for division 
among the workers will be smaller to that extent and the 
share of each will accordingly be reduced. If, then, in- 
creased return is an inducement to greater production 
and saving, it is manifest that the workers will be dis- 
couraged to the extent that the hire of capital reduces 
their portions. What advantage can accrue from acceler- 
ating the one class and depressing the other? This as- 



Capitalism 83 



sumes that the classes are numerically equal, which is far 
from being the case. The more correct assumption is 
that the few receive the benefits while the many must pay 
the losses. The return on capital, then, on the principle 
relied upon by its advocates, acts on the average as a 
deterrent rather than an excitant both upon the produc- 
tion and saving of capital. 

If it is contended that the workers paying the charge 
for the use of capital are also owners of the capital 
loaned, therefore the beneficiaries of the charge, it may 
be replied that since this charge must come out of produc- 
tion if the workers are not to lose by it, the amount re- 
ceived must equal the amount they pay, in which case no 
benefit would accrue. If, however, they receive three per 
cent on their savings and they must pay six per cent for 
their use in productive employment, it is manifest that 
the practical effect under the principle of the defenders of 
capitalism is that the workers are always on the losing 
side of the proposition. It is, of course, plain that the 
charge for the use of capital and whatever profit may 
accrue from an excess insurance charge are both included 
in the price of the product to the ultimate consumer, who 
cannot shift them. 

If the practice of paying a charge for the use of capital 
is the only way of securing its aggregation and beneficial 
use, it is no doubt far better for society to permit this 
practice than to be deprived of such advantages; but is 
society under the necessity of accepting either of these 
alternatives? No one can deny that the saving and effi- 
cient use of surplus capital make it possible greatly to 
increase production and bring into existence many desir- 
able and helpful things that could not otherwise be ob- 
tained, but these social benefits accrue to all, to the pos- 
sessor as well as to the non-possessor of loanable surplus. 
The creation of these general benefits, altogether desira- 



84 The Way Out 



ble in themselves, by no means justifies an unethical prac- 
tice that can be abolished. It is the moral duty of each 
individual member of society who is physically and men- 
tally qualified to work efficiently to conserve this surplus 
by permitting it to be used, and society has the right and 
the power when properly organized to compel him, if nec- 
essary, to do so. It does so now, but generally confines 
the application of the principle to extreme cases, usually 
for destructive purposes such as war. It is a sad com- 
mentary upon the world's so-called civilization that so- 
ciety will go to any extreme to destroy itself but will 
utterly refuse to adopt even the plainest and most reason- 
able methods of insuring its happiness and permanent 
welfare. It will tear down and destroy with reckless 
abandon but will only build up and construct under the 
lash of relentless necessity. 

If, then, the entire surplus production can be comman- 
deered by society to harm itself, it could, if it would, 
exercise the same power to promote its welfare. That it 
has not done so, that it would not have done so in the past, 
is beyond question, but the fact that it might have done 
so or will be able to do so when it chooses, proves conclu- 
sively that the existence of capitalism is not the only 
method by which society can enjoy the benefits arising 
from the cooperative use of its surplus productions. 

Does capital The only remaining ground upon which the 
earn its own hi re f ca pital can be ethically justified is 
hire? that it earns its own hire. It has already 

been shown that the borrower assumes the risk of loss 
and undertakes to renew the production without which 
it would soon become unfit for use, and likewise that the 
owner, along with all others, receives a positive benefit 
from such use. Capital is inert and of itself can produce 
nothing. It is labor that produces — the joint effort of the 



Capitalism 85 



mind and body of man. If the worker confers protection 
and benefit by preserving and using an otherwise perish- 
able thing so that its owner in common with others may 
possess and enjoy a variety of things that give him satis- 
faction and comfort, can this worker be, morally, called 
upon to surrender a part of his production as remunera- 
tion to one who has already been the recipient of valuable 
considerations without which he must necessarily have 
lost his savings? If anyone is to be paid as an incentive 
to stimulate the operation, it would seem to be more justly 
due the worker than the investor. The use of surplus 
capital makes possible the increased effectiveness of labor 
and the good arising from it eventually inures to the 
benefit of all. 

The entire surplus production, even though owned in- 
dividually, should be a common fund for facilitating the 
world's business. Its safety should be assured, its repro- 
duction arranged for and its beneficial use guaranteed. 
The participation of the owners in the general good that 
would result, along with the opportunity to draw upon 
this fund at will to the extent of their ownership for con- 
sumptive use, would fully meet all ethical claims they 
would have. Under this policy there would still remain 
all the necessary incentives to encourage production and 
promote savings. Cooperation would increase and the 
opportunities for moral development would be greatly 
multiplied. Capitalism can be justified and practiced on 
the grounds of expediency as long as it is the most effi- 
cient instrument available, but its lack of moral founda- 
tion leads to the conclusion that its full development will 
inevitably lead to its elimination. 



CHAPTER V. 

THE DIVISION OF PRODUCTION UNDER CAPITALISM. 

Ideal distri- The sum of the social product, if all mem- 
bntion. |3 ers f soc i e ty were self-sustaining, should 

be divided between them in the proportion that each had 
contributed to its creation, but no such ideal condition 
exists. 

Class Society may be divided into three classes, 

divisions. partially dependent, dependent, and inde- 

pendent. The members of the first produce less than they 
consume and their store must be supplemented, those of 
the second produce nothing and must be supported by 
others, and those of the third produce at least as much as 
they consume. The first two classes to the extent that 
they receive aid are a charge upon the independent class. 

Communistic The amount necessary to the discharge of 
contribution ^his communal obligation is necessarily sub- 
no a ways tracted from the general fund of products, 
hence lessens the portions of the workers. 
While this is true of any division at any given time, it 
does not follow that all expenditure for communistic pur- 
poses is a diminution of the worker's return, since such 
disposition of a part of the amount produced may cause 
greater production than would have resulted if no such 
expenditure had been made. 

The amount expended for good government, education, 
road building, etc., while an immediate loss to the work- 
ers, in the course of time greatly increases production, 
repaying all that they cost and actually increasing the 
sum that is to be divided. Remove the protection that 
government gives and stop the mind development that 

86 



Division of Production Under Capitalism 87 

education promotes and production would be enormously 
decreased. Discontinue the protection and care that 
society extends to its weak and helpless members and it 
would soon begin its descent to the brute level, becoming 
steadily more predatory and less productive as its moral 
standard fell. Proper expenditure, then, for these com- 
munistic purposes is no deprivation but rather an incen- 
tive to higher aims and greater efficiency. 

The dependents that injure the workers are those who 
can and will not work. The inefficient worker "soldier- 
ing" on the job, the able bodied tramp and that still more 

costly dependent, the idle rich, are parasites 
parasite ' on ^ ne b°dy politic. These are they who live 

upon bread they have not earned, prolong- 
ing their useless lives by subtracting from the portion 
that goes to the honest worker. The rich man or woman 
who does not earn what he consumes is, in an economic 
sense, quite as much of a pauper as the "Weary Willie" 
who begs or steals his bread. Society can much better 
afford to support the latter since his consumption is much 
smaller. 

Division of These communistic obligations discharged, 
production. ^he remainder of the production under an 
ideal capitalism would be divided as follows : 

1. The hire of capital ; 

2. Wages or compensation for services, mental and 
physical ; 

3. Insurance fund to protect invested capital ; 

4. The amount necessary to provide additional cap- 
ital to take care of the increase of the business. 

If borrowed capital is to be used, the amount of the 
product necessary to pay sufficient hire to induce owners 



88 The Way Out 



to loan it is absolutely essential. Assuming that the 
profit on the insurance account balances the losses, there 
would be no net loss to the workers in this item. The 
amount taken by the owners of the operation to enlarge 
the capital to take care of increased business, even in the 
ideal, is an exaction made upon the workers because of a 
basic weakness in the structure of capitalism. Without 
the power to take this amount necessary to insure its 
growth, capitalism would not only become static but must 
perish. Let us call this item profit, or that 
~7° * *J ests which the operation takes in excess of what 
title without ^ gi yes * What actually takes place is that 
compensation. the worker's share is diminished to the ex- 
tent of the profit, and wages are the part 
of this diminished residue of production which each 
worker gets in the proportion that he contributes to the 
production. It will be noted, too, that the title to this 
part taken as profit passes from the worker to the owner 
of the operation and the latter gives nothing in return 
for it. 

Capitalism Profit is, then, a tribute which the owners 
makes classes. f the economic machine impose upon the 
workers, and the fact that the possession of the instru- 
ments of production gives these owners this power makes 
of them a distinct class possessing a special privilege. So 
long as this capital or profit fund is devoted to produc- 
tive purposes the workers are not economically injured 
except to the extent that it may be made the source of 
hire for capital and used for consumptive purposes. This 
is true because the surplus necessary to efficient produc- 
tion should be so used and if the title to it had remained 
in the worker it still would not have been available for 
consumption. 



Division of Production Under Capitalism 89 

Capitalism The wrong consists in taking from the 
inethicai. worker his property without compensation 

and vesting the title in one who has no just claim to it. 
This act of expropriation of a part of the worker's pro- 
duction is a violation of the ethical principle and in con- 
travention of the socialistic theory that the worker is 
justly entitled to all that he produces. It is not uncom- 
mon to hear the beneficiaries of this unjust expropriation 

defend in strong terms what they call the 
Rig ts o pn- r jght s f private property when they them- 
viola t e d r selves are the most flagrant violators of the 

principle. What they perhaps unconsciously 
mean is to assert their right to hold safe from harm the 
property belonging to others which they have taken and 
for which they have not given anything in return. It is 
unquestionably a sound and altogether important prin- 
ciple that every worker, both of brain and hand, after dis- 
', , charging his communal obligations has an 

Rights to ones . , ° ., . . . . . ., , , 

property indefeasible right to the property he pro- 

duces, and there are only two legitimate 
ways by which he can divest himself of it, viz., either by 
gift or exchange. If he is protected in this right his 
title to his own property must remain in him until he vol- 
untarily divests himself of it, whatever use may be made 
of the property itself. 

Aside from the individual's duty to contribute to the 
government for public purposes and such voluntary con- 
tributions as he may choose to make to communistic 
causes, it is clear that his right to his own property should 
not be invaded. The sacredness of private property, to 
use a pet phrase of those whose practices are least in 
accord with the principle, should attach to everyone's pri- 
vate property from the lowest menial to the highest mag- 
nate. If this were done, capitalism would become im- 
possible, for its life tenure hangs on the special privilege 



90 The Way Out 



of violating the rights of private property in the hands 
of its original and rightful owners. In this expropria- 
tion we find the basic and ineradicable antagonism be- 

tween those class interests commonly called 
labor Capital and Labor. It is not to be denied 

that abuse from either or both sides of the 
controversy greatly aggravates the situation, but the 
point to be impressed is, that if no abuses existed, if the 
employers only expropriated so much as was actually 
necessary to highly efficient production and used it ex- 
clusively for that purpose, and the workers worked ever 
so efficiently, there would still remain like a thorn in the 
body politic that resentment that must follow injustice 
and that spirit of suspicion and mistrust that fills the 
breast of him who succeeds in taking from his neighbor 
any part of his goods without giving adequate return 
therefor. If, then, capitalism in the ideal shows such 
fatal moral defect, what can be said of it in its practical, 
everyday grossness? 

Capitalism The fact that the very life of capitalism 
necessarily depends upon its ability to take from the 
pro uces evil wor ker a part of his earnings without com- 
pensating him for it makes of it a law- 
breaker, a disturber of the peace, a source of infinite 
manifestations of evil. Under it the fundamental reason 
for cooperation, service, is obscured by an ever increasing 
greed that fattens upon what it feeds upon and, octopus- 
like, reaches out its tentacles to grasp in its strangling 
embrace all material wealth, power, and control. The 
mere material deprivation is perhaps the least harm that 
it occasions. 

The law of Mutual effort for mutual benefit is the law, 
cooperation. an( j jf ^ e distribution is not in accord with 
it and the worker does not receive the full result of his 



Division of Production Under Capitalism 91 



effort, there follows a corresponding loss in effectiveness 
and a dissatisfaction that is directly repressive in its 
effect. When the owner of the productive machinery as- 
sumes, as he must do under capitalism, to take to himself 
an undue share of the common benefit, this act carries 
with it discord and contention that injustice and viola- 
tion of fundamental law always superinduce. 

If the ethical method under which each worker re- 
ceives his just share of the production is not employed, 
the division between employer and employee becomes a 
confused process filled with incongruities that defy 
analysis and proper classification. To depart from jus- 
tice, the polar star of economics, is to drift without rud- 
der or compass. Under such conditions there is no law, 
no morals, only a struggling horde of selfish 
Selfish struggle mor t a i s ac ting without reason, without 

it lism right, impelled by insane desire to get pos- 
session of material wealth without much 
concern about the methods of accomplishing the desired 
result. In the mad struggle the highest thing to be hoped 
for is the acquisition of sufficient power to crush out the 
independence and life of the weaker elements. 

Under practical capitalism, the insurance fund, the 
amount taken to increase the invested capital and to pay 
returns to the owners of the business organ- 
Wet earnings. ization ^ ig repre sented by the net earnings 

or profits of the operation. In making the addition to the 

cost of the service to get these profits, the rule is to put 

on all the business will bear, that is to say, 

Allthebusi- to get the sa i e price at the point that will 

yield the largest net returns. This does not 
necessarily mean the highest price that the owner could 
exact. There is a point at which, if the price is further 
enhanced, it causes a diminution of consumption, and 



92 The Way Out 



therefore the article at a lower price with increased use 
will yield a larger sum of profits at the lower price than 
it would at the higher. 

Capitalism's Capitalism requires that invested capital 
ever increasing sha\\ j iave j^ s re turn, therefore the amount 
expropriated from the workers one year be- 
comes invested capital the next, thus requiring each year 
a larger share of the workers' production to pay this 
additional return. Thus it is obvious that progressively 
the capitalists will, to the extent of the addition to sur- 
plus, increase the percentage of their ownership of the 
machinery of production and transportation, and the 
workers must constantly undergo greater spoliation. 

It is possible that even under this condition the workers 
may receive even more than they did formerly because 
the greater aggregation made by the owners may in- 
crease the efficiency of production to such an extent as to 
enable them to give the workers quite as much and pos- 
sibly more than they before received and expropriate 
only a part of the actual increase resulting from more 
efficient production. This process can continue so long as 
production is being constantly improved, but when a high 
degree of efficiency has been reached, as must at some 
time happen, the additional exaction of capitalism must 
have the effect of constantly reducing the worker's share. 
Carried through its logical course, capitalism must even- 
tually reduce the share of the worker to a scale that will 
yield only a sufficient amount to sustain him as a work 
animal and preserve sufficient virility to reproduce his 
kind. In a fully developed civilization under capitalism, 
it would seem to be necessary that a static condition 
should eventually exist, under which even the expropri- 
ator must abate his exactions sufficiently to maintain the 
above referred to status of the laborer. 



Division of Production Under Capitalism 93 



A "fair If a capitalistic enterprise begins operation 

return." w ith a million dollars it demands a "fair 

return" on this amount, and when this exaction from the 
public amounts to an additional million it proceeds to 
claim a "fair return" on two million. The simple public 
has furnished this additional capital, yet is called upon 
to pay double the amount that it had to pay for the use 
of capital before it permitted itself to be exploited. In 
other words, the more the people are ex- 
^Tons ploited the larger the amount they must 

pay, presumably as a punishment for their 
ignorance in permitting the exploitation. This unmoral 
practice of taking the private property of the workers 
without consideration is bad enough, but insult is added 
to injury when the exploiter compels the losers to pay 
more tribute because they were despoiled. The existence 
of such a wrong is a sad commentary on the mental ca- 
pacity of a society that permits it. 

If the rights of private property were to be asserted 
and it had to be returned to those to whom it ethically be- 
longed, there are few capitalistic organizations that 
could make restitution and remain solvent. Under con- 
ditions as they exist to-day, practical considerations 
make it much more important to sustain the right to re- 
tain possession of property acquired by exploitation than 
to defend the rights of those who rightfully own what 
they possess. 

Each permissible cooperation should have social service 
for its object, but the existence and the success of the cap- 
italist system depend upon the exercise of special privi- 
lege that enables the privileged class to levy tribute upon 
society, and naturally the acquisition of 
Profit first, ^ p ro flt becomes primary and service second- 
ary. Under this condition the maxim be- 
comes, "Get all you can, giving as little as possible in re- 



94 The Way Out 



turn." Capitalism is responsible for the spread of this 
dishonest and thoroughly reprehensible doctrine. Like 
leaven it has permeated the whole social body and influ- 
ences practically all elements of society. Buy in the 
cheap market and sell in the dear one is not confined to 
the employer and trader, for it has made a deep impres- 
sion on the workers' consciousness and they, too, practice 

this rule of capitalism, getting all they can, 

mp oyer an man y f them giving as little as possible in 

fected alike. return. Generally speaking, the employer 

is ever ready to denounce the worker for his 
insatiable greed, his dishonest inefficiency and neglect to 
perform his part faithfully, seemingly oblivious of the 
fact that both he and the worker are conforming to the 
same principle. Each is doing his best to get more than 
he gives. 

Spreading the The more astute owners of the social ma- 
base of cap- chinery realize that the continuous opera- 
tion of exploitation dangerously narrows 
the foundation of capitalism, and therefore are trying 
various methods of increasing the numbers of the ex- 
ploiters so as to give greater stability to the system. A 
favorite plan is to induce the workers in the various oper- 
ations to become stockholders and thereby become sharers 
in the ownership of the surplus. If the employees in all 
manufacturing and industrial operations could be in- 
duced to invest their savings in the shares of their respec- 
tive enterprises and thus become beneficiaries of the ex- 
ploitation it would still leave in the exploited class a large 
proportion of the workers, notably the farmers and 
salaried classes in non-industrial and non-commercial op- 



Division of Production Under Capitalism 95 

erations. In other words, if the employers 
n argm £ e and employees in any given industry or un- 

exploiting class 

not a cure for dertaking having the power to name the 
exploitation. price of the service should cooperate to 
share fairly between themselves the profits 
resulting from the operation, the only effect of it would 
be to enlarge the exploiting class and it would in no sense 
be a cure for exploitation. 

It is charged that the possessors of great wealth, 
largely invested as it must be in the instruments of pro- 
duction and transportation, are bestowing 
oisonmg e w j£h liberal hands a part of their holdings 

springs of edu- . .. . r . ° 

cation and be- m these monopolistic enterprises upon edu- 
nevolence. cational and benevolent organizations with 

the purpose of creating a community in- 
terest in the existing order. It is obvious that these in- 
stitutions, when their life and growth are made depend- 
ent upon the success of the earning power of private 
monopoly, will naturally exert their influence to main- 
tain it. It is further charged that educational institu- 
tions are made the beneficiaries of spoliation so that their 
teaching of economics and ethics may be made to conform 
to the demands of the capitalist system. It will be readily 
seen that such a condition would offer an inviting oppor- 
tunity to prejudice the minds of the youth of the land in 
favor of the existing order and at the same time poison 
the very springs of truth. Whether these charges are 
well founded or not is a matter that might well be inves- 
tigated, for nothing would be more detrimental to the 
progress of free government and social development than 
to permit the existence of such a powerful influence di- 
rectly interested in the suppression of truth. 



96 The Way Out 



Is economic It would be informing to know how many 
expression universities and colleges in this country at 
present allow free expression on economic 
subjects if it chances to be adverse to the established 
system. 

The nearest possible approach under private initiative 
to a proper remedy for exploitation will perhaps be found 

^ . .. in private cooperation under which the co- 

Private coop- ... - . „ . . ., 

eratives operators furnish the necessary aggrega- 

tion of capital to operate efficiently for the 
members. In such case only the members would be 
served. If the service were extended to outsiders who had 
not contributed the capital required, it would give them 
an advantage over the members which would not be con- 
ducive to the growth and life of the enterprise. 

Profit sharing A combination of the employers and em- 
not a remedy, ployees to insure larger profits and higher 
wages is by no means a remedy for exploitation. The 
effect of such a policy would be to aggravate it. In such a 
case a community of interest is established for the pur- 
pose of increasing the exactions which the public must 
pay. Expropriation is none the less indefensible because 
the number of the exploiters is increased. Profit shar- 
ing, except in so far as it may be a method of adjusting 
wages more equably, holds out little hope of solving the 
problem. 

The ultimate effect of capitalism is to make a few rich 

and many poor. Under this system the important thing 

is to get control of the machinery of produc- 

controiof 10 tion and trans P ortation - This machinery 
transportation re P resen ts the most stable form of capital. 
It requires less effort to keep it in repair, or 
expressed differently, its reproduction is extended over 
a longer time than more mobile forms of wealth. The 



Division of Production Under Capitalism 97 



thing of most importance, however, is that it puts in the 
hands of its owners an instrument which is used to com- 
pel the public to surrender an excessive part of its pro- 
ductions for the service rendered. The owner of the mill 
regulates the toll, the manufacturer names the price of 
the finished product, and the railroad names the rates at 
which it will haul freight and transport passengers. It 
may be answered that commissions and other agencies 
have been instituted by the public to deal with such cases 
as involve the need for public protection, but 
Public - t k ag a j rea( jy b een s hown that if capitalism 

im^ssibie * s ^° ^ e ^ e P reva ^ m S economic system, it, 
in order to live and grow, must be permitted 
to exploit the public, and if supervising agencies, repre- 
senting the public, restrict exploitation below a certain 
point they make satisfactory service impossible. These 
agencies are, then, under economic necessity to refrain 
from eradicating the evil inherent in the system. 

Ownership and control are inseparable. If public 
agencies are really to control, then the public must own. 
What practically happens, so long as private ownership 
lasts, is that the owners control the public agencies. No 
reflection is here intended, nor should any be inferred, 
upon the probity or good faith of these commissions. The 
idea that is intended to be conveyed is that the public has 
created these commissions and given them an impossible 
task. It has elected to have a system that lives, moves, 
and has its being by virtue of exploitation, and at the 
same time has created commissions to control it, but has 
decreed they must do so in such a way as to preserve the 
system intact, an utterly impossible proposition! The 
child-like faith of the average citizen in the efficacy of reg- 
ulatory statutes to correct the evils arising from the ap- 
plication of unsound principles is tragic in its simplicity. 
Neither time nor experience seems to dwarf it. Each 



98 The Way Out 



succeeding legislative body brings with it its flood of such 
bills, which as remedial agents are not worth the good 
white paper upon which they are drawn. Like the be- 
lievers in the old-fashioned, large, nauseous bread pills, 
a gullible public swallows with avidity these legislative 
nostrums without adding the proverbial grain of salt. 
Apparently no effect follows these doses except an in- 
crease of the public's desire for demagogism and political 
charlatanry, which a horde of willing servitors do not 
appear to be able to satiate. While this state of the public 
mind lasts, the lobbyist may feel that his trade will flour- 
ish and the exploiter may continue unmolested the prac- 
tice of divesting Simple Simon of his surplus. 

The exploiters Reverting to the proposition of increasing 
few, the ex- foe number of the beneficiaries of the profit 

ploited many. taken f rQm ^ workers> it ig obvious that it 

is impossible by a voluntary association to get any con- 
siderable proportion to become investors, hence a large 
class must remain outside who would be exploited and 
the ultimate effect of the policy, even under the most be- 
nevolent direction, must be to vest the ownership of the 
means of production, transportation and transmission in 
the hands of the few wealthy, and while it may not follow 
that the poor would become poorer, the few rich would 
surely become richer, thus increasing the disparity be- 
tween the many very poor and the few very rich. 

Capitalism, then, is a cause of class division. Its ex- 
istence depends upon privilege and nothing save its elim- 
ination can cure this defect. The greatest 
The evil of ey jj Q ^ ca pitalism is capitalism itself. It 

capitalism is , .. . m j_ j-i i m. j? •• j.« 

capitalism cannot distribute the benefits of cooperative 
itself. effort with even-handed justice and there- 

fore under the most altruistic purpose it 
must fall short of reaching the standards of morality that 



Division of Production Under Capitalism 99 

would entitle it to be considered as a permanent system. 
It owes its origin to social imperfection and its founda- 
tion must of necessity crumble as man lifts himself 
higher in the scale of intellectual and moral advance- 
ment. 

Capitalism, then, is a system more easily apologized for 
than justified. Its method of division between the em- 
ployer and the worker must of necessity be unethical. It 
makes an impassable gulf between the two classes that it 
creates and prevents that efficient cooperation upon 
which depends the realization of the highest possible effi- 
ciency. It arouses the jealousy of each class over the suc- 
cess of the other, and is directly responsible for the un- 
reasonable demands that the one makes upon the other 
in the effort to share in the supposed exploitations that 
either of them may have perpetrated upon a helpless pub- 
lic. The causes of such destructive processes are in- 
herent in the system itself and therefore are ineradicable 
under it. 



CHAPTER VI. 

BUSINESS CO-OPERATION. 

The basis of social organization is cooperation. Its 
origin dates from the time that the first two mortals came 
into social relations. In a broad sense, each part of the 
_ . . social mechanism is related to all other 

Social 

mechanics parts and must cooperate with them. All 
are instruments of social service devoted to 
the central purpose of supporting the social unit, supply- 
ing its needs and gratifying its wants. To these agencies 
of service we shall apply the collective term "business." 
It may be observed that business being an important 
part of a cooperative unit must of necessity be co- 
operative itself. 

Mankind Historically, it is true that mankind has al- 

averse to ways been averse to cooperation. Its growth 

cooperation. -^ ^ een res j s ^ e( j a £ a jj times. Men have 

tolerated little more of it than force of circumstances 
compelled, but regardless of the inertia and opposition 
that it had to overcome, it has moved along slowly, it is 
true, but resistlessly toward its goal. 

Here, too, we see that natural instincts will and must 

find expression. Human beings belong among the classes 

of gregarious animals. Cooperation is the 

oopera ion, j aw Q £ assoc i a ti on# ]y[ an can no m0 re resist 

association ^ s man dates than matter can make itself 
independent of the law of gravitation. As 
the means of transportation and transmission are im- 
proved, making social intercourse easier and the ex- 
change of communications more rapid, the necessity for 
cooperation becomes more imperative. The services re- 

100 



Business Co-operation 101 



quired by society compel cooperation. No single agency 
can perform the entire task. The man who cultivates the 
ground must take the raw products to the transporter 
who carries them to the mills and factories which send 
them to still other factories that finish them and send 
them to the wholesaler who sends them to the retailer who 
delivers them to the consumer. The entire process is 
cooperative. Neither prejudice nor anything else can 
change it. Cooperation lives and grows because of its 
capacity to serve human needs, to satisfy human wants. 
These needs and wants increase as the mind of man ex- 
pands to conceive them and only a declining civilization 
can diminish them. 

The foolish efforts that people make to retain the bene- 
fits of cooperation and yet get rid of cooperation itself 
are always futile. The more or less general opposition to 
the growth of it proves that its development proceeds 

more rapidly than the mentality of the pub- 
Human inertia. ,. m , . . , 1V f. ,1 i 

he. The growing intelligence of the people 

finally overcomes these destructive tendencies and they 
first accept, then regard as indispensible, the very things 
they vainly tried to destroy. The opposition to the intro- 
duction of machinery and the change from small unit 
production to large are notable illustrations of the de- 
structive, reactionary attitude that ignorance always as- 
sumes towards all improvements of method. 

Thinkers, ad- The growth of cooperation, as already 
vance agents stated, is always in advance of the intellec- 
of civilization. tual g row th f the people, the reason being 
that the improved methods are the work of the thinkers 
who are always far ahead of the multiude. They are the 
advance agents of civilization, the prophets and teachers 
who often at a heavy, sacrificial cost, lead and sometimes 
drive the less advanced multitude up to higher planes 



102 The Way Out 



than they of themselves would ever have reached. How 
many countless ages has this besotted, bestial mass aim- 
lessly wandered in the wilderness of ignorant selfishness, 
waste, and inefficiency, when if it had only opened its eyes 
and entertained the vision it would have realized that 
Canaan with all its blessings lay invitingly before it! 
Indeed, having eyes it saw not and having ears it heard 
not, apparently preferring to believe lies that it might be 
damned! After all, it may have been best that man 
should go through these painful, evolutionary processes 
in order to prepare him for better things. When the in- 
ertia and hopelessness of the mass are considered, one 
may reconcile himself to any system, however crude, that 
would promise to lead out of the regions of despair. 

Business, as already pointed out, began its existence 

as a part of a cooperative whole. Its various elements 

were composed of small units and were 

usmess e- ften intensely competitive. As the social 

ganm small , * x , . . , , 

units parts became more closely interrelated, a 

process of elimination began, under which 
the weaker and less efficient factors began to disappear 
and the remaining units of service gradually grew larger. 
It is not material to this discussion whether the elimina- 
tion was effected by the destruction or the absorption of 
the smaller units. It at least happened and still continues 
to do so. 

Community of The larger the units grow the closer they get 
interest. m touch with each other, and the constant 

tendency is to establish a community of interest between 
them, if not in the actual results of the operations, at 
least in the things that affect the general welfare of the 
particular classes having common interest. This closer 
relation between the members of the classes is in a sense 
a re-adaptation and extension of the old guild principle. 



Business Co-operation 103 

Associations, Chambers of Commerce, and similar organ- 
izations are entirely cooperative and are intended as 
media through which particular lines of interest may ex- 
ercise their influence in the promotion of that which they 
wish to accomplish. Incidentally it may be said that 
these cooperative instrumentalities are often the vehicles 
for spreading the propaganda of the more astute leaders 
and enlisting the support of the full membership in be- 
half of measures which are not always, nor even often, in 
the interest of the uninformed majority that is usually 
ready to give its assent most readily to propositions it 
least understands. 

Organized So well organized is this business of spread- 

propaganda. m g propaganda, the press, the magazines, 
and every avenue of publicity are so often filled with it 
that escape from it is well nigh impossible. It is to be 
feared that this practice has become so efficient, that it 
has poisoned the sources of information to such an extent 
that the public is too often given, instead of the facts, only 
the things which organized business wants it to believe as 
facts. This propaganda covers all fields from the elec- 
tion of a president, the congress and the legislature of the 
states, down to the raising and marketing of pigs. The 
tremendous power of business over the press is hardly 
suspected by the ordinary citizen, and unless one is gifted 
with exceptional ability to read between the lines, the 
printed page cannot at all times be accepted either as a 
guide or a reliable source of information. 

Perhaps the most potent reason for this condition is 
the fact that the publishing of newspapers and magazines 
is a business, dependent, like all other business conducted 
under private initiative, upon profit for its life and 
growth, and there is, then, a common interest between it 



104 The Way Out 



and the propagandists who are also subordi- 
The mfll J ence nating other things to gain. This brings 
over the press. tne P°^ c y °^ the publisher under the domi- 
nation of the counting room, which makes 
the publication fill the needs and wants of the advertiser 
from whom it gets its major support. In theory, the edi- 
torial department of a publication should be entirely dis- 
tinct from its business management. The former should 
be the medium through which unbiased opinion and im- 
partial judgment would find expression. The advertiser 
should receive his money's worth in the publicity afforded 
him in the space he buys, but there is little doubt that this 
condition in far too many cases no longer obtains. The 
more probable supposition is that the serpent of greed has 
extended its slimy trail from the counting room through 
the editorial sanctum sanctorum with the result that the 
editorial columns, instead of containing expositions of 
truth, have in many cases become the vehicles of propa- 
ganda designed to promote the interest of the advertisers 
who pay most. 

Financial in- It is apparent, too, that the powerful finan- 
terests mfhi- c j a ] interests become increasingly more in- 

e on c edit()rial sistent that editorial p° lic y sha11 be in ac " 

cord with the things they desire to promote. 
Either through patronage, partial or entire ownership 
or community of interest in publications, the direction of 
public opinion is falling more and more under the power 
of business. To such an extent has this already become 
true, that the public ear is no longer given an opportunity 
to hear much of that which business interests do not want 
known. It is not intended to say that this condition has 
been effected through corruption as this term is generally 
understood. Much of it comes from the community of 
interest that naturally follows cooperation under private 



Business Co-operation 105 

initiative. The publication that counts for much is no 
longer the production of one or a few individuals with 
small capital. It is a large organization requiring very 
large investment. It falls naturally to the rich and pow- 
erful and they either have other large interests or are in 
friendly cooperation with those who have. 

Capitalism The publishing business functions on the 
makes control p ro fit principle just as all others do, hence 
there is a common bond, a mutual interest 
that compels harmonious action. Business 
is a class interest, the publishing business is a part of it 
and therefore naturally and inevitably becomes a class 
instrument. It is the vocal organs of the capitalist sys- 
tem. The more highly this system is perfected the more 
necessary it becomes that public opinion should be con- 
trolled, and the more urgent the need that propaganda 
should be dexterously woven in both the news and edi- 
torial fabric. 

Eaiiroad in- Perhaps in no class of business has this art 
fluence on keen more highly developed than among the 

the press. financial interests controlling the railroads 

of the country. Senator Robert M. Lafollette, in a speech 
in the United States Senate, Feb. 21, 1921, said of it: "I 
know that there was organized immediately a publicity 
scheme for perverting the truth. The railroad execu- 
tives who were at the end of their resources put up the 
pitiful face of having been wronged by the taking over 
of the railroads by the government. But their agencies 
of publicity are without limit in the United States to-day, 
and have been for many years. They were able to create, 
all the while that the railroad system was under govern- 
ment control, a false public sentiment ; they were able to 
drive into the public mind a wrongful statement of every- 



106 The Way Out 



thing that pertained to government operation. The truth 
will ultimately be known." During the period to which 
Senator Lafollette refers almost every avenue of pub- 
licity reeked with their propaganda against government 
operation of the railroad. It is doubtful if at any period 
there was ever so great effort made to prejudice public 
opinion or so reckless disregard of facts shown. The re- 
sult must have been exceedingly satisfactory. The public 
fairly reveled in the misrepresentations and false argu- 
ments sent to it by the ton, and that weakness of human 

nature to join in destructive hue and cry 
fooled insured the sympathy and cooperation of 

the ignorant multitude who, at the behest of 
their designing masters, have always been especially effi- 
cient in riveting their own chains. 

The banking In the matter of leadership and control of 
interest business, the banking interest may be said 

leads " to dominate. The few leaders in the finan- 

cial centres initiate the movement and it is passed down 
through the ever widening circle of Chambers of Com- 
merc, business associations, Boards of Trade, and corre- 
spondents until it has overspread the country. In this 
way they exercise an influence quite out of proportion 
either to their number or to the amount of resources they 
command. The small bodies do not consider their own 
aggregate importance. Each small unit compares its 
own lack of importance with the relative strength of its 
greater mentor and falls in line to swell the size of the 
army of followers ready to accept the sug- 
The keeper gestion and do the bidding of the few lead- 

T h^t 6 ers ' w ^° a g£ re g a tely are relatively much 
less powerful than their followers, thus pre- 
senting a case of the keeper leading the elephant. 



Business Co-operation 107 



Growth of The present rapid growth of class interests 

class interest. j ue £ greater cooperation has no parallel 
in history. The principle is very old but the extent to 
which it has been developed has never before been 
equalled. When it is considered that the development of 
a class interest in any sphere of human activity neces^ 
sarily causes the same thing to take place in other ave- 
nues, it is plain to see that the great concentration in 
banking, manufacturing, and commerce must incite the 
same thing in labor, agriculture, etc. Whatever else may 
be said of the present civilization, it is not proceeding 
along that line of common interest that has generally 
been supposed to be an indispensible prerequisite to the 
successful development of the democratic ideal. 

Extension of The banking interest has greatly extended 
banking ac- j£ s power and influence over business and is 
tivity. rapidly coming to dominate. Not satisfied 

with the narrower sphere of banking as it was formerly 
understood, it has branched out into transportation, man- 
ufacture, and commerce and is becoming more and more 
a dominant factor in every important field of human en- 
deavor. The constantly increasing rapprochement be- 
tween the banking business and other business is an en- 
tirely natural result of increased cooperation. It is true 
that banking and credit are just as much a department 
of business as purchasing material or manufacturing it. 
In theory, the fully developed, efficient business would 
have its banking department and therefore the closer re- 
lations now being established between business and bank- 
ing are an indication of an evolutionary advance in the 
right direction. It may be confidently expected that these 
relations will continually grow closer and those control- 
ling the credit resources of the country will become to a 
still greater extent than now the owners of the instru- 



108 The Way Out 



ments of social service. Expressed differently, the bank- 
ing business is in a broad sense only a department of that 
collection of businesses that make up the unit of social 
machinery, i. e., the machinery of production and distri- 
bution, the control of which under capitalism must pro- 
gressively concentrate in the hands of the few rich. 
When we speak, therefore, of the extension of banking 
control into new spheres of social activity, what is ac- 
tually meant is that the owners of the banking business 
are acquiring an interest in other branches of business. 
It is in the last analysis these relatively few people, rap- 
idly becoming dominant in social service activities who 
are the center of power, and the organizations of trans- 
portation, transmission, manufacture, and distribution 
are the instruments which they use to levy tribute. The 
profits derived from this source constitute a fund from 
which new investments are made, thus enabling them to 
acquire an ever increasing share in the ownership of the 
instrumentalities of social service. 

It is doubtful if society has even an approximate esti- 
mate of the extent to which concentration of ownership 
has gone. The profit fund accruing largely 

accretion 7 to tne ^ ew ' ^ e a snowflake started from 
some lofty peak, rapidly grows by accretion 
until it finally becomes an avalanche. Just so the tribute 
taken from the people, becoming capital and in turn de- 
manding a return for its use, through extension of in- 
vestments is yearly concentrating in the hands of the few 
a larger percentage of current production and insuring 
an increased degree of monopolization of social machin- 
ery. If the process is continued it is manifest that it is 
only a question of time when the few rich will have the 
rest of mankind in a state of vassalage. 

It is to be noted that business cooperation establishing 
as it does a class interest, forces a division between those 



Business Co-operation 109 



who work and those who own the machinery, but with 
the latter class should be included the workers in the 
managerial class, who on account of better compensation 
and hope of promotion will naturally take sides with the 
owners against the elements who do the more humble 

work. 

In whatever conflict may arise between the workers 
on one side and the owners and the managing workers 
on the other, each class will seek to gain the support of 
the outside public. In this struggle between these two 
classes the business elements, whether di- 
The public rec tly interested or not, and the general pub- 
supports the Hc win usually give at least their moral sup- 
business class. ^^^ to the buginess class? whi i e the work- 
ing class immediately involved must rely upon their fel- 
low workers for what assistance and moral support it can 
hope for. The lack of intelligence and solidarity among 
this class makes its support uncertain and inefficient. 
Business in such a contest has all the better of it. It has 
wealth, power, and political influence. It can go through 
strikes without seeing its children suffer for bread and 
shelter, but what constitutes its most powerful weapon 
is the ownership of the social machinery. The stoppage 
of this affects the comfort of the consuming 
Business acts „. who are unwimng to suffer incon- 

constmctiveiy. venienceg in order t hat wrongs, however 
grievous, may be righted. Business desires to keep the 
mills grinding and the trains moving because it is in its 
interest to do so, and society gives it hearty support in 
whatever action may be necessary to accomplish this pur- 
pose. The worker cannot carry out his pro- 
The workers gram constructively. He must act destruc- 
act destruc- t ^ e ^ and in doing g0 must cause not only 

tlvely ' business but the general public to suffer in- 

convenience and loss. Business can perpetrate its 



110 The Way Out 



wrong within the law and without causing society incon- 
venience, hence can invoke the aid and support of both. 

Selfish human nature would prefer to be served by- 
slaves rather than not be served at all, and for this reason 
the worker can never hope to enlist the sup- 

epu . 1C port of the public in its effort to accomplish 
terruption of ^ s en ^ s ^ the same public is to be deprived 
service. of the social service that it prizes more 

highly than it does justice or principle. The 
workers, if they are to succeed, must adopt methods of 
redress that do not collide with this human or inhuman 
trait, as one may choose to call it. The public will pa- 
tiently submit to being robbed either by business, the 
workers, or a combination of the two, but deprive it of the 
service it requires and it is up in arms at once. 

Business cooperation seldom takes a destructive turn 
so far as the public is concerned. If it adopted the lock- 
out as a means of either offense or defense, it would en- 
counter the same public opposition that is shown against 
the strike. Business has this great advantage over the 
workers, it can name its terms of employment and there- 
fore is always ready and willing to supply the needs and 
wants of the public. If its conditions cannot be met by 
the workers and they feel compelled to cease work, the 
public, always superficial, rarely looking to first causes, 
holds the workers responsible for the interruption of the 
service and accordingly joins with business in the effort 
to compel the resumption of business activity. 

Business coop- Business cooperation in finance, manufac- 
eration reflected ture, and distribution must of necessity be 
m politics. reflected in political activity. Business 
under capitalism necessarily involves a special privilege. 
Special privilege is a social cancer which, when once al- 
lowed to develop, proceeds to permeate the entire body 



Business Co-operation 111 

politic until the surgeon's knife eradicates it. Inevitably, 
business developed under capitalism and depending upon 
special privilege for its life and growth must exert its in- 
fluence to prevent the enactment of laws that are unfa- 
vorable and to promote those that are favorable to its in- 
terest. Special privilege exists either because of the lack 
of proper organization or because of special grant from 
the sovereign power. The first calls for more law in the 
public interest and the second suggests the repeal of such 
existing law as may confer special favors. In either or 
both cases it becomes highly essential to its success that 
business should bring about the closest cooperation be- 
tween itself and the government. It must have control 
of the law-making power in order to prevent the enact- 
ment of law that would endanger its welfare and even its 
existence. 

Special privi- The basic principle of business under cap- 
lege the basic italism is special privilege and if this is 
cf ittlism withdrawn the system itself must fall. 
Therefore, there is no limit to what it not 
only would but must do to preserve its life. It is under 
an impelling motive to control legislation and to have a 
judiciary that will construe the constitution and laws in 
accord with the idea that the capitalistic system must be 
preserved. It goes without saying that the need for a 
sympathetic executive is equally imperative. 

When it is recognized that the principles of special 
privilege and those of democracy are utterly at variance 
it will be obvious that the antagonism between them will 
grow increasingly intense as they are developed. If both 
continue to develop, a final death struggle between them 
will be inevitable. Assuming that civilization will con- 
tinue to advance, that democracy is to live, it becomes evi- 
dent that business under capitalism in increasing coop- 



112 The Way Out 



eration is busily engaged in digging its own grave. The 
more it grows, the more efficient it becomes, the more 
fully it becomes able to conform to all that could be ex- 
pected of it, the more nearly does it approach the stage 
when it must of necessity give way to a higher form of 
concentration of effort. 



CHAPTER VII. 

LABOR CO-OPERATION. 

Cooperation of Aside from that general cooperation in 
workmen. social activities in which all except the de- 

pendents and shirkers engage, the workers ranking below 
the owners and managing workers cooperate in varying 
degrees among themselves. The general object of this is 
to get benefits for the participants that they cannot get 
so well without it and in this respect it is not different 
from other classes of cooperation. 

Necessity of In a system of social development that ne- 
laborcoop- cessitates class interests, it becomes neces- 
eration. gar y ^^ the workers of all grades should 

unite for their improvement and protection. The fact 
that they often misuse the power that combination puts 
at their command does not prove that they should not 
have it to be used for proper purposes, nor does the fact of 
such misuse differentiate them from other classes posses- 
sing cooperative power, for the latter are equally guilty 
of committing this wrong. 

The workers are under the same imperative necessity 
to organize that employers are. The latter must be eco- 
nomically efficient if the large productive unit is to dis- 
place the small, and the workers must cooperate with the 
employers in the general purpose of production. There 
exists, however, a diverse interest in the matter of di- 
vision of benefits which makes it absolutely essential that 
the workers should organize as a class so that they will 
have, as nearly as may be, equal economic power, in order 
that they may meet employers upon equal terms when 
questions involving contracts and division of benefits 

113 



114 The Way Out 



__ , . arise. If employers and employees are to 

Freedom of . i .. » i * 

contract maintain proper relations, freedom of con- 

tract must exist, for without this indispens- 
ible prerequisite, no real contract can be made. To make 
such a contract, the minds of both parties must meet wil- 
lingly. A forced agreement, when either or both parties 
are under compulsion is not in accord with the principle 
of contracts, but is made under duress and while it may 
conform to the letter of the law and be en- 
on rac s o forcible, it is nevertheless a product of force. 
It is the imposition of terms upon the 
weaker by the stronger. The form of the force employed 
in no wise improves the character of the transaction nor 
does it alter the nature of the effects that follow it. 

The workers may accept the employers' terms, not be- 
cause they are willing to do so, but because they regard 
them as more tolerable than that which would follow if 
they did not accept. They might prefer to work for a 
scant living because not to do so would deprive them and 
their families of all means of a livelihood, 
under duress They might contract to work an unreason- 
able number of hours because the failure to 
do so would deprive them of any opportunity to work at 
all. On the other hand, the employer might contract to 
pay wages that would involve him in loss because not to 
keep the operation going would occasion a still greater 
loss, or he might agree to shorten the hours to such an 
extent as seriously to reduce the efficiency of the opera- 
tion rather than fail to carry out contracts that he had 
already made and that, if breached, would permanently 
injure his business. Agreements of this character are 
not in any true sense contracts. They are simply condi- 
tions imposed by the victor upon the vanquished and will 
stand until the latter again feels that he is in a position 
to refuse further to comply with them. 



Labor Co-operation 115 

Intention the The preliminaries to a contract are vitally 
basis of con- important. To make a genuine one, there 
tracts. must exist among all the parties to it a de- 

sire to agree, and this desire will only be present when 
each feels that his own interest is fully protected and that 
there is in the act some substantial benefit for himself. 
Contracts are usually socialistic in character in that they 
are made on the assumption that each must receive ade- 
quate consideration for all that he concedes. 

The ideal contract is that which assures equal and 
exact justice to all concerned. The motives of the con- 
tracting parties should spring from an honest purpose. 
Under this conception of the nature of a contract, neither 
the employer nor the employee should wish to overreach 
the other but both should aim to arrive at terms that 
would be fair to each other. The rule should be fairness 
in essentials and accommodation in non-essentials. 

Mutual con- The idea of the employer buying labor in the 
sideration cheapest market and the worker selling his 

should control services in the dearest is entirely at vari- 

contractors 

ance with the spirit of fairness and mutual 
consideration that should control both sides in making 
contracts. Such an attitude of mind brings the matter of 
that which should be a friendly adjustment down to the 
low plane of disreputable horse traders, each seeking to 
put over on the other the more inferior animal, a game 
of force, fraud, and duplicity which does not end with the 
signing of the contract but follows the operation under 
it to its end. It starts both parties out with disregard 
and distrust of each other and leads to reprisals that ser- 
iously impair the efficiency of the operation. The em- 
ployer, believing that the worker feels no particular in- 
terest in the welfare of the business and that he is at 
every opportunity seeking to give as little as possible for 



116 The Way Out 



the wage he receives, and the worker, on the other hand, 
thinking that the employer cares nothing 

Unjust con- f()r ^ m except what he can get out f fas 

both parties labor in the way of profits, are not in a state 
to them. of mind that makes either for peaceful or 

profitable cooperation. To the casual ob- 
server, it seems obvious that both sides too often start 
wrong. 

A human it is plain that far better results might be 

problem. expected if both would get their fundamen- 

tal concepts in better accord with common sense and good 
morals before undertaking to come to a common under- 
standing and agreement. The thing that seems plainest, 
yet which is of tenest overlooked, is that the employer and 
employee problem is one of human nature, and that any 
satisfactory solution of it must be in accord with human 
instincts. To undertake to make labor a 
commodity commodity to be bought and sold in the 
market like beans and potatoes, or to make 
capital an entity, confusing it with the person who em- 
ploys, is nothing less than an effort to be- 

Capital not r , J , ' , , . to , , , . 

... cloud the issue and make a proper analysis 

an entity. . ■*• * . j 7 

and correct solution of it more difficult if not 
entirely impossible. Divested of these imposed obscuri- 
ties the matter is reduced to the very simple proposition 
of searching out the right and justice of the case and 
writing into the contract the best judgment of all parties 
concerned, thus putting behind the instrument their col- 
lective conscience to enforce its provisions. This may be 
regarded as ideal, but it is no more so than the laws 
against theft and murder which are enf orcible only to the 
extent that the public judgment and conscience justify 
their penalties. In other words, the agreements between 
employer and employee must have moral sanction in 



Labor Co-operation 117 

order to enlist the support of public opinion in carrying 
them out because public opinion is and always will be the 
most powerful force for compelling the fulfillment of 
social obligations. 

So long as these two classes are on the plane of the 
beasts of prey which fight over the results of the chase, 
just so long will there be industrial strife with its result- 
ing inefficiency, waste, and destruction. The first essen- 
tial to a contract is a thorough understanding by both 
sides of the things which both must concede, that is to 
say, the conditions that cannot be changed even by mu- 
tual consent. 

In a contract under capitalism the following things 
must be granted : 

1st. That the capitalist must have a return on his 
capital. 

2d. That the employer must be allowed to take a 
requisite sum to set aside as a reserve against losses. 

3d. That the excess of this reserve belongs to the 
owner of the business and is the source from which the 
expanding needs of the business are to be met. 

4th. That which is left of the production after pro- 
viding for the first three classes is the wage fund from 
which all the workers, including owners, managers, and 
all others who contribute labor to the operation must be 
paid. 

The pay of The division of this last fund should be 
capital the strictly in accord with the socialistic rule 
con ro mg ^^ ^^ wor k er whether of high or low de- 

considers tion 

gree should receive pay in the proportion 
that his effort contributed to the result. 

Wages are paid first, but they are regulated with the 
view that full provision shall be made for the preferred 



118 The Way Out 



obligations because without a belief on the part of the 
owner that such will be the case he will not contract at all. 
If he errs in judgment and the residue remaining after 
the payment of wages is insufficient to meet these de- 
mands, the business is unprofitable and will be abandoned 
if it can be continued only on this basis. 

It is not intended in this connection to deal with the 
ethics of capitalism but only to call attention to the es- 
sential things that are prerequisite to a contract between 
employers and workers under it. It may not be amiss, 

too, to call the attention of employees espec- 

gnor ^ t ially to the fact that the employers are no 

cause of more responsible for the existence of this 

capitalism. unjust system than they themselves. It 

finds its support in that ignorant greed that 
apparently rules in the breast of most men, tempting 
them to get all they can from others and to give as little 
as possible in return therefor. Capitalism is an exponent 
of this state of the public mind and is perhaps the best 
system possible while that psychology continues to exist. 

Useless to The efforts of employers to prevent the or- 

attempt to ganization of workers will be fruitless. It 
preven a or - g q U ^ e as s t U pid as was the public's fight 

cooperation. . . . .. ... ;1 , 

against increased cooperation or the work- 
ers' efforts to prevent the improvement of method and the 
increase of efficiency through the introduction of machin- 
ery. The workers not only have the right to 
organize organize but it is their duty to do so. They 

should cooperate to the greatest possible 
extent for proper purposes. Among these may be men- 
tioned education and training in their respective voca- 
tions, the development of their skill and efficiency, in- 
struction in and practice of thrift and economy, the in- 
vestment of their surplus earnings, the provision by in- 



Labor Co-operation 119 

surance in the most beneficial form against lack of em- 
ployment and for the protection of their families in case 
of sickness or death, the promotion of faithful and effi- 
cient service, the proper sanitary and healthful working 
conditions in the establishments in which they labor, the 
free choice and election of their own representatives to 
meet the representatives of the employers to discuss 
terms of labor, working hours, wages, and all other mat- 
ters involved in the contractual relations between em- 
ployers and employees. 4 

In these and in many other things there is a mutual 
interest and the employees have a clear right to consider 
and act on them as an organized body. Any attempt on 
the part of the employer to deny the employee this right 
to act in an organized way is the first step, not towards 
industrial peace but war. It is the effort to substitute 
force for friendly agreement and arbitrary power for 
rational settlement. Only besotted slaves will willingly 
submit to any invasion or abridgment of these primary 
rights. 

Erroneous The employer to-day seems more inclined 

views of £ i 00 k U pon the organization of his em- 

orgamzation. pi ovees as an ac t f hostility, a preparation 
on their part to begin a destructive warfare upon the en- 
terprise in which they are both engaged. The workers 
seem little different from their employers in this respect. 
They, certainly in the early stages of organization, are 
imbued with the importance of the labor organization as 
a fighting machine, a thing to be used to compel the ac- 
ceptance of their terms and the concession of their de- 
mands. Both sides seem too often oblivious of the great 
good that workers' organizations might be to employer 
and employee. Were they intelligently conducted and 



120 The Way Out 



their possibilities for good honestly developed, neither 
the employer nor the employees could afford to dispense 
with them. It is far too common that the employee thinks 
of the labor organization as an instrument designed 
solely for getting more pay for less work. 

Past sins still Considering the ages through which the 
bearing master has driven the worker and his fore- 

*■ fathers as wage slaves, showing neither 

mercy nor justice, it should not surprise one that he holds 
the views above attributed to him. These past sins are 
still being atoned for and much of the present difficulty of 
making proper social adjustments is fairly attributable 
to them. 

Neither of these classes can be properly understood 
unless it is considered in its relation both to its past and 
to its present environment. The more humane and ra- 
tional attitude of both to each other is of very recent date 
and marks a distinct advance. They, coming into the 
new light, necessarily see things in a rather blurred way. 
Their mental vision is still far from normal and they 
must have time and experience to enable them to bring 
themselves into proper adjustment to their new environ- 
ment. It may be observed, however, that the 

Education the . „ , ,. , , .-, ■, 

remed increase of education has been responsible 

to a much greater degree than is generally 
supposed for the breaking down of the old concepts, and 
the introduction of new readjustments in the relations 
between these two classes. This fact has induced hope- 
less reactionaries to believe that the way to peace leads 
backward and that further development of the intellec- 
tual force of the workers should be discouraged. Happily 
this element is small. For the greater part of society 



Labor Co-operation 121 

realizes that the mistakes and even the evils of limited 
education can best be cured by more and better educa- 
tion. 

All progressive minds agree that the road onward and 
upward leads through the schoolhouse. The fact that is 
most reassuring to those of liberal views is that at no 
time in the world's history was the mass so much edu- 
cated as now, nor was there at any previous time a civil- 
ization that was comparable to that which exists to-day. 
It has its shortcomings and even its crimes but it is un- 
_, , , questionably superior to any that ever pre- 

The standard -,-,., . , . . r U1 n 

raised ceded it. Society is more critical than form- 

erly, which shows that its standard has been 
raised. It sees more, therefore demands more. 

Economic The social organization of the workers in 

organization ^he p as ^ } ias ]j een autocratic, and is to a 

large degree so even now. The dominant 
note of it was represented in the term "master and serv- 
ant." The problem at present is to displace this over- 
lordship by some practicable method that will preserve 
and if possible increase efficiency, and the same time dem- 
ocratise the operation so that to each, whether owner, 
manager, or worker, will be preserved that individual 

self-respect that coercion of any kind de- 
. n * v *. ua stroys. The value of individual initiative 

initiative * . „ . . 

important as a ^ ac ^ or m efficiency has never been gen- 

erally appreciated. Once organized so that 
this most estimable and valuable factor will have full 
play, society would make rapid strides. 
™.o 00 ™ Autocracy either in government or industry 

represses it and tends to make individual 
effort mechanical. It dwarfs and even atrophies the in- 
ventive faculty without which the man and the mule 
occupy practically the same plane in the productive field. 



122 The Way Out 



Cooperation The cooperation of workers even for non- 
deveiops productive purposes makes them think and 

thought. pj an an( ^ w j ien thig f acu ity f mind is called 

into activity, even indirectly, for one purpose, it will and 
must be used for other things as well. Once this power of 
mind is aroused it makes its influence felt in many direc- 
tions. Not only will it compel readjustments in the 
matter of wages and working conditions but it will result 
in a better understanding of the economic laws govern- 
ing production, thereby increasing the productive power 
of labor. 

intelligence Given a mass of workers little above the an- 
the basis of thropoid apes in intelligence, who would 
e ciency. submit to any conditions that the employer 

might impose, and who on account of their lack of under- 
standing require very minute directions, in contrast with 
the same number of highly intelligent workers capable of 
class organization and a large measure of self-direction, 
there is no doubt that the latter would be far the more 
profitable to the employer. 

The more highly workers are developed the less the dis- 
tance between them and the employer. That is to say, as 
the workers rise in the scale of intelligence there will be 
a corresponding approach to the level of democratic 
equality between the employer and employee. 

Jealous of It is not strange that this process should 

power. arouse a spirit of opposition and distrust in 

the minds of the employers. It is a human weakness to 
look with great misgiving upon the dispersion of power 
that one holds, and to feel that the foundations of things 
have been rudely shaken and endangered if any change 
of the status quo is threatened. Autocrats are rarely suf- 
ficiently philosophical to appreciate that the rise in any 



Labor Co-operation 123 



civilization is dependent upon the diffusion of power and 
the greater freedom of the mass. Moreover, it is still 
more inexplicable to them that this greater opportunity 
for the exercise of individual initiative is 
Diffusion of nQt mconsisten t with but is necessary to a 
power ' more efficient form of cooperative organiza- 

tion. In so far as the cooperation of the workers makes 
the position of the slave driver impossible, it is an agent 
for the increase of efficiency and the development of social 
fitness. 

Industrial When we consider the time that it has taken 
democracy to bring political democracy up to its pres- 
wiiicome ent j m p e rfect state, it is readily seen that 

slowly " an early and complete democratization of 

industry cannot reasonably be expected. At best the 
process will be slow and the evolution must take its way 
through the various vicisssitudes incident to a change so 
fundamental in character. 

The most difficult problem involved is the development 
of a spirit of accommodation in employers and employees. 
This must be accomplished before there will be any 
chance to employ practicable methods for carrying out 
democratic action. Once the proper psychology obtains, 
the' methods and machinery for putting democracy into 
practice will easily follow, in fact, cannot be prevented. 
The process of preparation for the diffusion of democracy 
must involve the recognition of a common interest and 
the equality of right of both employers and employees. 
So well must this basis be established that there must be 
on the part of all a fixed purpose to give unquestionable 
assent to majority decrees, which can only be done when 
there exists the general conviction that mutual conces- 
sions lead to the equal protection of all. 



124 The Way Out 



It will always be found futile to undertake the intro- 
duction of methods to accomplish the general purpose in 
advance of the existence of that democracy of spirit upon 
which permanence must rest. It should be remembered 
that democracy cannot be made to order, and if such an 
attempt is made, it, like Locke's government 

DcmocrRcv 3, 

wth model, will generally be found impractic- 

able. True democracy is a growth more 
closely allied to spirit than to matter. It can never exist 
except in cases where a mutual interest is recognized. 

It has already been shown that the life of capitalism 
depends upon the existence of class interests, and there- 
fore an industrial system functioning under its principles 
offers insurmountable obstacles to a highly developed 
democracy between employers and employees. The most 
that can be hoped for under this system is a partially de- 
veloped democracy dealing always with those relations 
between employers and employees that involve well recog- 
nized common interests. In stating this limitation it is 
not intended to discourage the effort to establish a com- 
mon bond between employers and employees, who in 
many respects are co-workers, having far more in com- 
mon than has apparently so far been appreciated by 
either. 

Production is the reward for labor and this sum of ben- 
efits must be diminished to the extent that return for the 
use of capital is made. The owner in large operations 
must have more surplus capital to take care of the growth 
of the business than the savings from the result of his 
own labor will furnish, therefore this must come out of 
production before the division between the workers takes 



Labor Co-operation 125 

place. If these deductions are not made in 
Payment for advance of the division between the workers 
the use of cap- ^ mugt be p rov id e d for or the business 

ital Brevei)ts 

full democratic cann °t function normally. It is obvious that 
action. the workers under such a system are com- 

pelled to accept as compensation, not all that 
they produce, as is required by the ethical principle, but 
only a part of it. Under these circumstances there is 
lacking that common interest in the process that must 
exist as a condition precedent to full democratic action. 

In these fundamentals of capitalism there cannot be 
uniformity and equality. Stated differently, the moral 
law marks the limitations of democratic action. No ma- 
jority action is permissible if it contravenes 
Majority ac- mora i j aw# ft ma y be that the workers in 

tion not valid , , , .,, . , « , , , 

against moral SOme CaSeS would be Willing to f oregO that 

law part of their earnings that must be taken 

under capitalism to pay for the use of cap- 
ital and to swell the surplus fund of the owner, but such 
action would be entirely too exceptional to be relied upon 
as a foundation for a permanent system. It would be 
more nearly in accord with human nature for these de- 
privations of the workers to remain a bone of contention, 
a thorn in the side of the body politic that will never be 
remedied until the cause is removed. 

It is possible that capitalists, owners, and workers in 
particular industries may cooperate to the extent of al- 
lowing each to get the desired share. Under 
Combination ^- g arran gement each of these three classes 
ag ^ s e ma y get even more than its share. The 
simplest method of accomplishing the feat 
is to charge an increased price for the product and appor- 
tion the result between themselves. It has been charged 
that the coal mine owners and miners have already done 
it. This by no means cures the defect since it only trans- 



126 The Way Out 



fers the loss from the workers in that particular field to 
the shoulders of workers in some other avenue of effort. 
It is not difficult to see that the coterie of exploiters, cap- 
italists, owners and workers have a common interest in 
robbing the public and doubtless could reduce all differ- 
ences between themselves to mere matters of expediency 
to be decided by majority action. It is only in such cases 
that one may reasonably expect anything more than a 
limited application of the principles of democracy to cap- 
italistic industry. 

Relative Acts of relative injustice are as provocative 

injustice f di scor d as are those of actual injustice. 

p ™ voca * ve A robber chieftain who does not divide the 
booty fairly between his followers and him- 
self will disrupt his organization. If the employer is 
getting large profits, that of itself will be a cause of dif- 
ference between him and his employees. He may pay 
them all that they produce and even more and yet they 
will not be satisfied. So long as they believe that they are 
not getting their full share of the exploitation he is prac- 
ticing upon society, they, like the horse-leech, will ever be 
crying for more and more. They will be deeply ag- 
grieved, not because they are denied justice, but because 
they are not permitted a larger share of the unjust ex- 
action that the employer is making upon the public. The 
workers give most trouble in times of so-called business 
prosperity when the margin of profits is high. It is then 
that organized workers are most powerful and insistent. 

Capital and Under the conditions that usually prevail 
labor. cooperation will more likely develop along 

class lines. The owners, capitalists and managing work- 
ers will constitute a class now commonly called "Capital" 
and the workers will constitute another now called 



Labor Co-operation 127 

"Labor." These classes will usually be found in opposi- 
tion rather than in agreement and a spirit 

the iuiiffle °^ mu tual distrust and belligerency instead 

of harmony will dominate both of them. 

The law of the jungle is their code. 

"The good old rule, the simple plan, 
Let him take who hath the power 
And let him keep who can," 

best expresses the spirit governing the relations between 
these classes. If they cooperate it is under an insecure 
truce, and when this is no longer advisable, war results. 
The essential elements of capitalism make this result in- 
evitable. There cannot be fair and unfair dealing at the 
same time in the same transaction. Injustice cannot 
reap where it has not sown, keep what it has wrongfully 
taken and then transmute itself into justice. 

Impossible to The ablest minds of all the ages have spent 
escape the their energies in the effort to devise methods 
e ec s o vio- ^y which the exploiter could retain the ill- 
moral law gotten gains and still escape the Nemesis 
that the moral law sends after him who vio- 
lates it, but all in vain. It is an impossible task and the 
sooner this lesson is learned, the better for mankind. 
Justice, fair dealing, and regard for others are as neces- 
sary to the growth of the soul as bread is to that of the 
body. There can be no real progress in social develop- 
ment when suspicion, hate, and desire for reprisal con- 
trol social action. 

Justice the The organized workers use their power 
safe way. principally to shorten time and increase 

pay, especially the latter. Regarding the former, it may 



128 The Way Out 



be said that within certain bounds the employer is not 
necessarily benefitted by maintaining longer hours nor 
damaged by decreasing the hours of the work day. There 
is a point, varying much in different occupations and to 
a less extent in each individual worker, 
Maximum pro- w h ere foe workers' maximum production 
™-™„ +^ Q for a day is reached and if the time is either 

given time. J 

lengthened or shortened, an actual loss of 
production results. This maximum of production should 
not be understood to mean the greatest amount the 
worker can do for one day but it represents a higher 
average rate of production that can be maintained indefi- 
nitely. This does not exhaust the worker 
work Tt™ but keeps him P h y sicall y and intellectually 
economical **t and msures that he can maintain produc- 
tive efficiency for a longer time. The older 
theory of rushing the worker to extreme effort, casting 
him aside when exhausted, is analogous to the waste of 
natural resources and leads inevitably to national pov- 
erty and decadence. It is economically unsound and 
must tend to produce social abasement. 

Methods of The methods adopted by the organized 
organized workers to reach their objectives are usually 

labor usually destructive in their nature. Behind their 
demands, though often thinly veiled, there 
is usually the purpose to resort to force if necessary. As 
undesirable as this may be, it has nevertheless been of 
great benefit not only to the workers but to society as 
well. It is easily conceivable that if the workers had not 
cooperated to acquire power and used it even ruthlessly 
and unjustly at times, the whole world would to-day be 
little in advance of semi-barbarism. The knowledge on 
the part of employers that too little consideration for the 
workers would lead to organization and reprisals has no 



Labor Co-operation 129 

doubt done a great deal in improving the conditions of 
the workers of all classes, and incidentally has been of 
general benefit as well. 

The average worker's conception of a labor union is 
that it is an instrument to be used mainly to force em- 
ployers to pay higher wages and adopt a shorter work 
day. These have been the union's greatest achievements, 
and in so far as the hours of labor and rates of pay were 
reasonable the results have justified their existence. 

It is evident that conditions are better than they would 

likely have been had there been no labor organizations. 

Conceding all this, the fact remains that our 

Industrial and industrial and commercial life is organized 

commercia anc | f unc ti ning on the principle of force, 

life functions , . . . . ° . . \ / , . . 

on force anc * ™*e diverse class interests which are 

principle. ever growing stronger and more clearly de- 

fined are constantly in a state of defense, if 
not actually engaged in offense. Neither do there appear 
any encouraging indications that the trouble is abating 
or that the angles of difference are being rounded. On 
the contrary, the divergence between these classes seems 
to become wider as time goes on. 

The workers become more and more insistent that a 
larger measure of what they conceive to be justice shall 
be accorded them and the employers have constantly been 
constrained to yield in this respect, with the 
ise m result that the standard of living of the 

of living- workers has constantly risen. These con- 

cessions have not so far been, relatively, at 
the cost of the employers, but have come out of the in- 
crease of production which developed intelligence with its 
improved methods and machinery has brought about. 

The guiding spirits of capitalism long ago recognized 
that its exactions must be met by inducing more efficient 
production so that the toll would come out of the excess of 



130 The Way Out 



production above what had formerly been produced, else 
the portion of the workers would become perceptibly di- 
minished. Were this diminution to take place, the rich 
growing richer, and the poor becoming poorer, there 
would come about conditions that would lead to disrup- 
tion and eventual destruction of the present economic 
system. They realized that the most prom- 
ising way out was through increased pro- 
protection to duction which would permit capitalism to 
capitalism. take its tribute, yet leave for the workers 
certainly as much and perhaps more than 
had formerly been given them. Thus under most fa- 
vorable circumstances both classes might become richer 
compared with the former status. This has actually re- 
sulted but has not proven a cure since the relative dis- 
tance between the richest and poorest is ever growing 
greater, and the demands of the workers for their rela- 
tive share of the increased production is becoming more 
insistent. 

The struggle The struggle that aspires first for equality 
to excel never ends. There is ever present in the 

human being a well-developed purpose to 
level things down, to make opportunity more nearly 
equal, but man does not stop at reaching equality be- 
cause, this attained, he still continues to strive to out- 
distance others. This purpose is an expression of the 
natural instinct to excel, and when it can be kept within 
the limitations of moral law and be employed as an incen- 
tive to promote human prowess, it deserves and should 
receive hearty approval and encouragement. The work- 
ers, emulating the owners, organize, then begins the 
struggle for recognition and consideration. The more 
they achieve, the stronger they become and the more they 
demand. They were satisfied in the early stages with a 



Labor Co-operation 131 

few pennies more than they had formerly received but 
their ideas of a standard of living expanded always more 
rapidly than the means of affording it. 

The owners have yielded ground steadily, and nearer 
and nearer are they forced back to the line of last defence, 
that is to say, the workers, as general intelligence is dif- 
fused and they come under more efficient 
a or s leadership, will understand more clearly 

demands their economic relation to the owners and 

realize more keenly the unmoral foundation 
of capitalism. Their demands for wages and better 
working conditions were at first reformatory in their 
nature but the progression will not stop with mere re- 
form. It will go farther and become revolutionary, de- 
manding that full justice be done, that the return on cap- 
ital be abolished or at least reduced to its lowest possible 
terms, that there shall be substituted for capitalism a 
system that will not require that the surplus productions 
of the many be transferred without consideration to the 
few owners of the social machinery, and further that this 
machinery, vesting in the few monopolists the power of 
levying tribute upon society, shall belong to all the people 
to be used for their benefit. Whether one agrees or dis- 
agrees with the one or the other side to the 
e s rugg e controversy, he must indeed be dull of per- 
fundamentai ception who does not see that the time is 
rapidly approaching when the struggle for 
a deeply fundamental industrial change will become a 
world problem. 

Thus far the reference has mainly been to industrial 
workers but they by no means constitute either in num- 
bers or in importance the greater part of the working 



132 The Way Out 



, , . class. From the days of Aristotle to the 
The plebeian ... . .,. ,. .,, ., 

class present time every civilization with its 

privileged classes has rested upon a plebeian 
class, a great mass of ignorant toilers who would submit 
to being made the hewers of wood and the drawers of 
water for their masters. Special privilege means this 
and nothing less. Its existence can do nothing less than 
cause the robbery of some class of workers for the benefit 
of the favored few. 

As the industrial workers become more powerful 
through organization and succeed in increasing their 
wages, the employer proceeds to shift the added burden 
to the shoulders of some weaker class of workers, which 
for the nonce becomes the burden bearer. Perhaps no 

classes have suffered more from this cause 
JL™ low than farmers and what is usually called 

common labor. *> 

common labor. It is true that many en- 
gaged in farming, owning their own lands, are them- 
selves exploiters of the poorer farmers who rent lands 
from them. The great increase in tenancy proves that 
this process of exploitation is going on constantly and is 
fast developing a subject class. It can readily be con- 
ceived that, when the exploitation which capitalism in 
organized industry imposes upon all farmers is supple- 
mented by the toll that greedy landlords impose on ten- 
ants, the latter have little reason to expect much improve- 
ment in their condition. 

Farmers least The farmers, on account of their extreme 
social-minded, individualism which in the past has made it 
practically impossible to organize them in an effective 
way, have always been an easy mark. They of all classes 
are the least socially minded. Their slogan may be differ- 
ent but their practice is "Each for himself and the devil 
take the hindmost." 



Labor Co-operation 133 

Promotion of The productive power of the farming class 
production, h as k een g re atly increased in the last de- 
cade. As already noted, the directing forces of capital- 
ism have recognized the imperative necessity of more 
efficient production. Through teaching more scientific 
methods of cultivation and promoting the use of im- 
proved machinery they have tremendously increased the 
sum of production. As these better methods become more 
generally understood and applied it is entirely probable 
that still further increases will result. 

This work of education is being done under both public 
and private initiative. The cooperation brought about by 
the educational courses designed to increase production 
will also make possible its use for other purposes as well. 
Evidence of this is already making its appearance in 
efforts to organize cooperative enterprises in distributive 
work. 

Once the farming class has learned that it can act to- 
gether, exchange ideas and promote the interest of all in 
productive effort, it will be only a step to apply the same 
principle to protect itself from the exactions that num- 
berless unnecessary middlemen have imposed upon it in 
the past. The cooperative psychology is 
oopera lve nQW k em g ra pj(jiy developed among farmers 

developing an ^ ver y ^ ar reacnm & results may be con- 
among farmers, fidently expected. The movement though 
still in its infancy is spreading rapidly. 
Like all new movements in the hands of the inexperi- 
enced, it will encounter its obstacles, pitfalls, and its 
failures but is certain to succeed in the end to the extent 
that its limitations are not exceeded. The cooperators 
would do well to consider that cooperation under private 
initiative has its limitations and that undertakings that 
overstep them are simply inviting disaster. 



134 The Way Out 



Cooperative This movement now concerns itself largely 
manufacture. with distribution, but must later on take up 
manufactures as well, since the benefits of cooperation 
are very problematical if they are dependent upon capi- 
talistic manufacture with its power to name the initial 
price for their supplies. The large units of manufacture 
can well afford to assist the cooperators to destroy small 
manufacturers and middlemen and eliminate every un- 
necessary expense of distribution of which they are not 
the beneficiaries, because all that is so saved but adds to 
the fund from which capital gets its return. Even if 
these savings were divided as they to some extent will be 
between the cooperators and the large manufacturing 
units, the latter can well afford for the time at least to 
promote the change. This development among producers 
is so far more cooperative in name than in fact since 
much of it is capitalistic in form and even more so in 
spirit. The basic desire, or more correctly stated, greed, 
that will not be satisfied with mere protec- 
oopera ion ^ Qn a g ams t exploitation from others, 

rather than prompts the imposition of all that the bus- 
in fact. iness will bear, and in so far as this is done, 
the operation is not in accord with the coop- 
erative principle but represents a shifting from one class 
of exploiters to another. 

These efforts, however, develop a class spirit and con- 
sciousness that tend to keep all classes growing in accord 
with the class principle that capitalism introduced. The 
farmer and the common laborer are simply following the 
example of those afforded special privileges, making of 
themselves classes to conform to the class environment 
which capitalism has created. Capitalism must have a 
subject class or perish. 



Labor Co-operation 135 



The ever increasing lobby at the center of government, 
representing every class known to exist in 

Class privilege ^ ^.^ ^ makeg plain that the evil 
bearing fruit. ^^ rf ^ priyilege have brought forth 

an abundant crop. Should the subject classes develop 
sufficient power to secure immunity from exploitation it 
must inevitably result in the destruction of the present 
economic and industrial system in large production, 
transportation, and transmission. When the workers 
demand justice it means that they are asking that cap- 
italism be displaced. It means that they insist that the 
opportunity of any to take more than their fair share 
based upon their contribution of effort shall be forever 
made impossible. It not only means that the rich shall be 
denied opportunity to prey upon the poor but also that 
the latter, too, shall be denied the chance to get anything 
more than that which they may earn by honest, efficient 
work. 

Development It is obvious that the equal development of 

of class all class interests must lead to the destruc- 

interests lead tion Q f S p ec i a l privilege and the substitution 

to their of gome gystem that w iH be able to function 

destruction. .^ &ccQrd ^.^ the democratic principle of 

equal rights to all and special privileges to none ; The 
hope is that these conflicting class interests, capitalists 
of all kinds and workers of every description, by their 
greedy demands and disregard of the general interest 
may finally convince a majority of the people that no class 
is to be trusted, and that class government by whatsoever 
class is an intolerable tyranny negativing every principle 
of democratic freedom and fairness. 



136 The Way Out 



Man learns it is entirely probable that the evolution had 

little except £ p rocee( j along class lines, for man learns 

r . 01 f . little except from his mistakes, and even bv 

H11ST9,_KPS 

that method he requires a wealth of example 
that does little credit to his intelligence. This class co- 
operation is making tremendous strides. It is marshal- 
ling the forces for a mighty contest in the near future 
that will shake the foundations of the existing social 
order. What have hitherto been regarded as epochal 
events will be insignificant in comparison with those that 
are impending. Decent regard for the public welfare as 
well as intelligent self-interest will suggest to everyone 
the importance of shaping public policies so that these 
mighty changes may be effected with the greatest good 
at the least possible expense. Mankind is being chal- 
lenged to show its fitness to go onward and upward. May 
it stand the crucial test. 



CHAPTER VIII. 

THE TREND TOWARD MONOPOLY. 

Progress The progress of social development depends 

depends upon the elimination of the unnecessary. 

u ? on f. Waste and inefficiency are its greatest 

elimination , . , TJ . . ,, . ° . . , 

of the drawbacks. It is economically immaterial 

unnecessary. whether these result from improvident use 

of production, the inefficiency of the work- 
ers, or from the lack of proper organization. The effect 
in either case is the same. Society suffers a loss to the 
extent that either waste, inefficiency, or useless duplica- 
tion of effort exists. The magnitude of this loss can 
hardly be appreciated. If reasonable use, efficient work, 

and effective organization were the rule, it 

eer organ- - g p^^ble that a fourth of the working 

labor population would not be needed in their 

present occupations. With better social ad- 
justment they could be employed elsewhere more advan- 
tageously both for themselves and for society. 

Waste by The waste resulting from the unnecessary 

duplication duplication of labor is a tax upon useful 
a °* workers in that those so employed are con- 

povertv suming the products of labor without giving 

adequate return therefor. When one con- 
templates this vast amount of wasted energy, he ceases to 
be surprised that the poor are so numerous or that their 
standard of living is so low. With this army of social 
parasites usefully employed, the production of wealth 
would be greatly accelerated, making possible the eleva- 
tion of the standard of living to a point never before 
reached. 

137 



138 The Way Out 



The law of The law of being is effective labor. This 
bemg. j aw d em ands that nothing be lost. To live 

in accord with it the highest possible degree of conserva- 
tion of energy must be attained. From this law man de- 
rives authority to adopt any method not inconsistent with 
the ethical principle that tends to bring the social process 
into accord with the requirements of efficiency. When 
wiser use or improved method makes the employment of 
workers unnecessary in a particular sphere, it becomes 
a social duty to transfer them to some other more useful 
work. A multitude of little shops might be displaced by 
one large distributing house that could with far fewer 
workers do the public service more efficiently at greatly 
reduced cost. 

Reduction in Many small factories poorly equipped might 
number of with great profit be superceded by a large 
organization with the best available equip- 
ment, enabling it to furnish the goods more economically 
and more satisfactorily. This process should apply so 
long as larger volume produces an economic saving. To 
get the full social effect of this better method, the savings 
effected must be liberally shared with the buying public 
in the form of lower prices. As a matter of history, this 
is exactly what has happened in the economic evolution. 

Primitive The provisions for meeting public needs ad- 

methods. j us t themselves to the existing environment. 

When there were no means of transporting products or 
transmitting ideas long distances, each little neighbor- 
hood was a world in itself. Here the old woman with her 
loom manufactured the fabrics, the blacksmith made 
nails, or in his absence people used wooden pegs for nails, 
the wheelwright made crude wagons and carts, the 
women pounded the corn on flat stones, as there were no 



The Trend Toward Monopoly 139 

mills to grind it, and men fashioned their rude imple- 
ments and weapons with their own hands. Time passed, 
development took place and communication, rarely at 
first, but with increasing frequency, occurred between 
this small locality and the nearest neighbor ; 
Extension of the borders f ^th widened until they met, 

the common _ . , . , ,, « 

* t r st forming a larger community ; the means 01 

communication kept pace in the march of 
progressive development, and it became possible to ex- 
change products over a greatly extended area in the same 
time and with even greater facility than formerly could 
have been done in the smaller district. This necessarily 
increased demand for manufactured pro- 
evolution 6 ducts, and the old woman's loom gave place 
to the cloth mill, the blacksmith's trade was 
taken over by a nail mill, and the water or steam driven 
mill ground the grain. The porter gave place to the pack 
mule, which in turn was succeeded by the team and 
wagon that yielded to the railroad and canal. The faster 
the transportation, the more nearly instantaneous the 
transmission of thought, the larger the community be- 
came ; the more extensive the community, the greater the 
variety of wants, and the greater the facilities required 
to supply them, hence the larger factory superceded the 
smaller. 

The more Thus went the course of evolution in social 

efficient development with its constant readjustment 

destroys the Qf meang to endg> j t be noted> to that 

the advent of a higher order occasioned the 
displacement and destruction of the lower, hence the more 
perfect system must rest upon the crushed remains of the 
less perfect which preceded it. This process by which the 
more efficient supplants the less efficient is ever present 
and operating in an ascending civilization. The peddler 



140 The Way Out 



gives way before the small store that in turn is super- 
ceded by the department store, because the larger opera- 
tion, on account of augmented volume, lowers the percent- 
age of expense and can thus confer a greater benefit upon 
the public. It is this economy that makes the evolution 
possible. 

Selfish The principle of self-interest prompts better 

incentive. organization, enabling the owners of the 

social instrument to use it for their gain, and society wel- 
comes the improvement because the saving effected must 
be divided with it. There is little altruism in economics. 
Man gives his sympathy to the vanquished but reserves 
his support for the victor, and he can always be relied 
upon to be true to that which he may conceive to be to his 
advantage. It is out of this self-interest, often degene- 
rated into unmoral and even immoral selfishness, that 
the improvements of social organization have come. 

From the simplest to the most complex social relation 
there will be found a common interest existing that holds 
the social body together and causes it to function, strange 
to say, in accord with individual self-interest. Mutual 
effort for mutual benefit is by no means sacrificial, but 
fully in accord with that intelligent, sublimated self- 
interest that many mistake for altruism. This principle 
encourages the selective process that eliminates the less 
efficient, hence, when better service becomes attainable it 
is gladly accepted. 

In order to live, an organization must possess superi- 
ority both in effecting economic savings and in distribu- 
ting them. This greater power of effecting savings de- 
pends largely on efficient organization and the ability to 
acquire at least economic cost the things necessary to pro- 
duce results. These social improvements have usually 



The Trend Toward Monopoly 141 



resulted from two principal causes, necessity and the 
power of invention. The former furnishes the stimulus 
and the latter seeks to devise means to ends. Each step 
in progress creates a new need and the inventive faculty 
of man is challenged to meet it. The power to organize 
may properly be said to belong to the inventive faculty. 
Industrial organization has developed in America more 
rapidly than in any other country, due largely to its 
wealth of raw material and to the protective tariff policy 
of the government, inaugurated something more than a 
half century ago. It is here that the units of production 
are largest and here, too, they have more nearly reached 
a state of private monopoly. 

Material It is unfortunately true that material de- 

precedes moral velopment comes first and the establishment 
development. of mora i limitations comes afterward. The 
invasion of a newly discovered country takes place and 
the pioneers throw off restraint. Their regard for law 
and reverence for moral restraint disappear before the 
rapid reversion to primitive instincts. They react with 
great promptness to their wild environment. It is only 
after the period of discovery and exploitation begins to 
approach its culmination that the settlers seriously con- 
template the inauguration of a reign of law and order. 
So long as they find unrestricted opportunity to exploit, 
they show little inclination to moralize. 

Chaos precedes Thig apparently chaot i c st ate, through 

which all new developments must come in 
the march toward higher and better things, is not without 
real advantage. It tears out and levels obstructions pre- 
paratory to the introduction of more orderly methods. It 
offers opportunity for experience from which some at 
least will extract wisdom. 



142 The Way Out 



Greed and lust The growth of business organization offers 

for power no exception to the rule just stated. Its 

rivmg pathway up from the depths is strewn with 

the carcasses of the weaker things that it 
has ruthlessly crushed and cast aside. Greed for gain 
and lust for power have been the impelling forces that 
have driven men forward. They have labored better 
than they knew. Their cold and often cruel selfishness, 
their lack of moral perception and even their violations 
of moral law, despite law and knowledge, have all been 
overruled for the public good. These evil forces, often 

blind servitors of a beneficent providence, 
for d continue to bring about conditions that 

compel closer cooperation and better social 
organization. 

In this way the march toward monopoly is kept up. 
Those most responsible for this development are least 
willing to accept the inevitable results of it. They con- 
tinue to strive with might and main to construct social 
machinery which they vainly hoped to appropriate to 
themselves. It is scarcely just to judge the acts of either 
individuals or classes except by contemporary standards. 
Each period has its own ethical standard. 
Each period ^ g soc i a i cooperation becomes more highly 
standards developed the moral standard rises. His- 

tory is replete with instances of men who 
were eminently successful according to the accepted 
standards of their times, who at a later period for the 
same acts would easily have been put in penal institu- 
tions. 

Industrial, commercial, and financial evolution has 
gone forward, not in accord with moral law, but in large 
measure against it. The social sin of omission committed 
originally by the public in its failure to devise proper 



The Trend Toward Monopoly 143 

machinery for its own service made the unmoral and 
often immoral substitute system necessary. 

Capitalism, dependent for its existence upon special 
privileges that must exploit others, has developed an in- 
ordinate greed for gain and lust for power 

Mania for _ . . .. . , , , , „ . , 

ain which have superinduced a state of mind 

closely resembling mania. This obsession 
not only affects those who succeed in amassing wealth 
and in acquiring great power, but extends its baneful in- 
fluences down to the lowest elements of society. It makes 
a false standard that is generally accepted, under which 
the mere possession of wealth becomes the token of high 
achievement. The ambitious and strong go forth to get 
it, and often are more or less indifferent to methods or 
morals if they make the task of accomplishing the desired 
result more difficult. The weaker, the despoiled classes, 
instead of condemning the wrongs of which they are the 
victims, are more likely to be filled with envy because 
they are not able themselves to become successful exploit- 
ers. They look with open-mouthed astonishment and ad- 
miration upon the successful looters who within the pale 
of the law may succeed in filching millions from others 
less astute intellectually, but perhaps quite as obtuse 
morally as themselves. This conscienceless 
erab ' game of grab insures the introduction of 
class interests and introduces a state of war 
between them. Each strives to master the other, and as 
is usual in war, all seek to organize their followers into 
effective fighting forces. 

Those owning and managing the social machinery, 
recognizing the common interest between them, continue 
to get into closer cooperation and through destruction 



144 The Way Out 



and absorption are rapidly bringing all 
api a an these instrumentalities into harmonious re- 

ion or 

monopolies lation. This compels the workers to organ- 
ize as a defensive measure, and once they 
have become sufficiently strong, they proceed to demand 
a share of the spoils that monopolistic enterprise may be 
able to seize. There appears to be little, if any difference 
in principle between the monopolistic owners and the 
equally monopolistic labor organizations. They both are 
out for prey. They hunt successfully together and it is 
only after the game is killed that they engage in the di- 
version of fighting over the results of the chase. 

These elements, the owners of industry and the indus- 
trial workers and their allies, find their easiest accom- 
modation in preying upon the primary pro- 
reymgupon Queers, who of all classes are least organ- 
producers * zec ^> ^ut even ^ ne y wno m & H P as t a £ es have- 
been most imposed upon, now show signs of 
restiveness. They are rapidly developing a class con- 
sciousness and a spirit of resistance against being made 
the burden bearers of civilization. 

This rapid growth of class interests and the closer or- 
ganization and cooperation that it compels is something 
new under the sun. History records no parallel to it. 
That there have been class interests in all past civiliza- 
tions is true, but never before were they so general or so 
inclusive. These various classes, though bitterly antago- 
nistic, are in a broader sense getting mankind closer to- 
gether, humanizing and socializing it. Sor- 
Seifishness ^ se ifiQh nes8 j s doing the splendid work of 
lggmgi s preparation that must precede that more 

own grave. r r x- 

perfect organization which will destroy all 

i class interests by the elimination of special privilege. 

This class war or armed truce is bringing mankind into 

an organized state. It is compelling, as nothing has ever 



The Trend Toward Monopoly 145 

done before, conformity to the principle of leadership, 
without which cooperation is impossible. 

Leadership This process of democratization rests its 
essential. n0 p e f ultimate success, not as many sup- 

pose, upon the elimination of leaders, but upon the devel- 
opment of the ability of the mass to choose them wisely 
and to limit their opportunities to abuse their powers. 
Under this conception, the greatest leader becomes the 
servant of all. The constant effort of all classes is to elim- 
inate the unjust autocrat and to substitute someone else 
who will serve more unselfishly. 

Class interests This unprecedented growth of class inter- 
tend toward es ^ as paradoxical as it may appear, is in 
democracy. re ality a long stride forward in the direc- 
tion of democracy. The class development is the opposite 
of democracy. It denies the existence between the classes 
of that common interest upon which all democratic action 
depends, but at the same time it does establish beyond 
question that within the class there is a common bond, 
a mutual interest, and that class efficiency depends upon 
faithful recognition of interdependence. 

Learning In short, class interests are compelling men 

democracy to learn the lessons of democracy in di- 
^divisions. visions> an(J when they become sufflciently 

developed to perceive the extent of their mutuality of in- 
terest they will have been sufficiently trained to apply 
the doctrine in a larger way. 

The lesser must precede and disappear before the 
greater. The owners and managers have been constantly 
extending their spheres of influence and power. The 
units of operation have steadily grown larger and more 
efficient until in many lines practical monopoly exists. 



10 



146 The Way Out 



These developments have driven the workers in all lines 
to organize in self-defense. That still greater concentra- 
tion and organization will take place is not to be doubted. 
The day of little things has gone, never to return. 

Three stages There are three principal stages in this eco- 

of economic nomic development : 

development. 

First, general opposition to concentration; 

Second, attempt to regulate it; 

Third, an acceptance of the principle and the effort to 
apply it in the most beneficial way. 

When the larger units of production, distribution and 
commerce first began to appear and displace the smaller, 

it aroused in the public a spirit of oppo- 
opposition sition that found political expression in the 

slogan, "Bust the trust." Stringent and 
drastic laws were enacted forbidding all combinations in 
restraint of trade, but the trusts and monopolies con- 
tinued to grow under them as they had never grown be- 
fore. 

stage of Later the courts were called upon to enforce 

regulation. these laws and they actually decreed the dis- 
solution of a few of the largest, but the method of dissolu- 
tion, if it may be so-called, left them even more secure in 
their monopolistic powers than before. In fact, their 
shares after dissolution became more valuable than ever. 
The courts could not tear down the improved methods 
without producing a very chaotic economic and industrial 
condition. Of necessity, they were compelled to go 
around the stump rather than through it as the letter of 
the law required. 



The Trend Toward Monopoly 147 

Never was there a more convincing illustration of the 
futility of enacting laws that had for their purpose the 
arresting of the march of economic progress. The courts 
under these laws were called upon to turn the hands of 
the clock backward, to cause civilization to decline, and to 

destroy the effects coming out of a more 
powerless highly developed mind-force, a task entirely 

beyond them. Had they construed the laws 
as they were written, the results would have been so dis- 
astrous that they would doubtless have led to the hasty 
amendment if not repeal of them, but such decisions 
would likely have produced serious industrial and com- 
mercial disturbances that might possibly have shaken the 
foundations of the government. It seems to have been a 
case in which the courts were left the alternative of choos- 
ing that which they might consider the lesser of two evils. 

The country for some time has been passing out of the 
first phase into that of a belief in and an attempt to reg- 
ulate the larger units. The public mind has come to rec- 
ognize the economic superiority of these 
Large unit i ar g e aggregations and to appreciate their 
beneficial ability to render more efficient service. It 

realizes now as never before that the effect 
of more efficient organization with its better methods is 
to make possible a standard of living that would other- 
wise be impossible. 

No reasonable and fair mind will doubt that with all 
its faults and even crimes, large unit production in a ma- 
terial sense has been productive of great benefit, not only 
to the rich but to the poor as well. The distance between 
them measured in wealth is no doubt greater than ever 
before, but it is quite as true that all have more now than 
they ever had at any previous time. 



148 The Way Out 



Change of Nothing more striking has occurred to illus- 
pubiic trate the change of public opinion regarding 

opinion. monopolistic development than the argu- 

ment lately advanced in certain high regulatory official 
quarters that one of the causes of delay in getting the 
cost of living reduced is the consideration shown smaller 
and less efficient factors by the larger, thus preserving 
the existence of these weaker elements at the cost of the 
public. Surely there must have been a marked change 
in public psychology when the official class begins to ex- 
press such views. The effort to break down 
The public large unit production has utterly failed. It 

relies on , , , , -i i i • 

t .. would have been an unpardonable crime 

regulation. m .„,., 

against civilization if this destructive policy 

had prevailed. In the degree that this development has 

progressed, the public has become convinced that these 

operations must be brought more nearly in accord with 

the service principle, and to effect this object it has been 

increasingly insistent that they should be brought under 

government regulation. The longer this experiment is 

tried, the more apparent the fact becomes 

a °°ohitnient 1S " tnat those wno re V u P on tn * s policy are 
doomed to the same disappointment experi- 
enced by the advocates of destruction as a remedy for 
trusts. 

Efficient In the first place, if government regulation 

regulation were attempted on a scale and to an extent 
impracticable, ^at would offer grounds for even a hope 
that it would be effective, the tremendous complexity of 
it would make it utterly impracticable. Such an attempt 
would result in the establishment of a bureaucratic in- 
terference with business that would make the country at- 
tempting it the laughing stock of the rest of the world. 
Busines could not function under such a system. Better 



The Trend Toward Monopoly 149 

by far adopt the laissez faire method, leav- 
Laissez faire m & eY ^ s to develop inordinately and destroy 
preferable to themselves. In a practical way what would 
attempted happen under a proposed government regu- 
rgitation, lation policy would be that the trusts and 

monopolies would regulate the government 
instead of the government regulating them. Even now 
there are many indications that this very thing is getting 
under way and has already assumed proportions and is 
wielding influence far greater than the masses have con- 
ceived. 

The source of He is little informed who supposes that the 
power. national and state capitals are the sources 

of power. They are but the exponents of that sovereignty 
that theoretically should reside in the whole people. It 
is just here, however, that theory and fact part company 
and are daily getting farther apart. The real sovereign 
is that part of the people which is most active, which can 
exert most influence. This cannot be ascertained by 
counting noses. In fact, this controlling and often un- 
seen force is vested in the very few who 
the few possess the wealth and control the avenues 

of public information, the currency and 
credit of the country and the instrumentalities of produc- 
tion, transportation, and transmission. These few are 
they who outline the public policies and see to it that the 
representatives support them. It is not intended to say 
, that this result is accomplished by corrupt or even unlaw- 
ful methods, using these terms in the usually accepted 
sense. The methods as a rule are more refined. It is 
effected by the exercise of financial and economic power. 
To be more concrete, the relatively small numbers func- 
tioning through compact organizations, such as a Na- 



150 The Way Out 



tional Chamber of Commerce and its associated bodies, 
or a national labor organization and its local branches, 
would wield more influence in government than all the 
rest of the people. These and similar interests are or- 
ganized both for defense and offense. Not 

6 , . • , only can they reward their friends and pun- 
reward friends . , , , . . , , ,n T 1 J. 1 

and punish 1S ^ their enemies, but they are able to clas- 
enemies. sify them with far greater precision than 

the unwieldy, disorganized masses can ever 
do. The latter, like the mad elephant, when aroused de- 
velop a mob fury that is impartially dispensed to friends 
and foes alike. In fact, it is more likely that the astute 
leaders of their enemies by lying propaganda and art- 
fully conceived demagogic appeals may cause the disor- 
ganized and uninformed to vent their wrath upon their 

real friends. The smaller numbers, thor- 
Closely oughly organized, know what they want and 

concentrated h()W ^ gQt ^ wMle ^ widely sca ttered mil- 

„«-.,.. «,« lions with no definite objective, without in- 

versus ine 

scattered telligent leadership, blunder along from one 

masses. pitfall to another. 



For the present at least, the safety of the existing order 
depends upon feeding the multitude. Better organiza- 
tion, improved method and the use of ma- 
The safety of c hinery have so far made this possible, and 

orderTemands S0 lon £ as the standard of livin g is bein £ 
that the mul- raised, exploitation may with some degree 
titude be f ed. of confidence be continued, but when once 
the tide turns, and the masses from what- 
ever cause must submit to serious deprivations in this re- 
spect, the danger signals will automatically make their 
appearance. 



The Trend Toward Monopoly 151 

Hope in The case, however, is not so hopeless as the 

education. foregoing may lead the pessimistically in- 
clined to believe. General education is being promoted. 
The spirit of cooperation is rapidly developing and the 
tips and downs of the masses are the meth- 

the^eaeher °^ s * n ^ ne scno °l °^ experience, teaching the 
people knowledge and enabling them to 
learn wisdom. They are wandering in the wilderness 
from which, when they are properly prepared, they will 
emerge into a happier land which they are not yet quali- 
fied to enter. 

Private Private monopoly grows apace. It is doing 

monopoly a S pl e ndid work in getting the social ma- 

chinery in order, but it has its fatal defects 
that will finally prove its insufficiency and 
cause its displacement. It will demonstrate through its 
blind selfishness that it cannot be controlled. It will act 
its part upon the stage of world evolution and pass as 
other things before it have done to its final reward. It 
at best can only be regarded as a stage in 
n y a s age human progress, a thing that served its time 
progress an( * disappeared before the succeeding 

order, which will mark another step upward 
in human progress. The coming order awaits the devel- 
opment of a proper psychology. Man moves under the 
urge of necessity and as this develops he too often, like 
Lot's wife, looks behind, but is pushed along by circum- 
stances that he cannot control. He has no option but to 
adapt himself to his environment. He may choose to a 
greater or less extent the path he travels, but choose as 
he may, they all lead to the same goal. 



CHAPTER IX. 

THE INDIVIDUAL IN CO-OPERATION. 

Effects of Conceding the economic advantage of better 

organization organization and closer cooperation it is per- 
y pon e tinent to inquire into the effects that they 

will have upon the individual being. So- 
ciety is not as some suppose, a conglomerate mass ground 
out by nature as men grind sausage, but a body composed 
of live, sentient members. Each is a separate entity hav- 
ing characteristics peculiarly its own, constituting indi- 
viduality. Man is no exception to the law of nature that 

requires that of all the leaves upon all the 
rule trees, no two shall be alike. He who devises 

a system failing to take this basic fact into 
consideration invites disaster. The assumption that all 
men are alike and can be jumbled into an indistinguish- 
able mass is false and the structure resting upon so un- 
certain and unsound foundation must inevitably fall. 

Principles Individuality must be given full sway, but 
invariable, ^his by no means excludes the recognition of 
methods an( j con f orm jty to principles on the part of 

each and all. Principles never vary. They 
are the same to all, but method is as devious as a ser- 
pent's trail. All may be taught and required to conform 
to the same principles and only good will result if the 
principles themselves are sound, but once undertake to 
compel all individuals to conform to fixed methods and 
those who submit will degenerate into mere machines 
that will continually decline in potentiality. It is in 
method, then, that individuality will find its widest op- 
portunity for expression. 

152 



The Individual in Co-operation 153 

Freedom of Freedom of individual initiative of all 
initiative. forms of human liberty is the most import- 

ant and sacred. It might well be said that it compre- 
hends all the forms of liberty, and without it man is an 
abject slave whether he occupies a throne or sweeps the 
streets. The right to think, to draw one's own conclu- 
sions and formulate private judgment, all authority to 
the contrary notwithstanding, is of all rights the highest. 
Once surrendered, the foundation of true character is 
shattered. It goes without saying that each should keep 
an open mind and hear without prejudice all evidence 
that may be available, but it should be advisory only. It 
should not matter from what source evidence comes or 
upon what authority it may be predicated, the final de- 
cision, both as to its credibility and truth, 
The individual ^^ regt with ^ individual himself. So 
the final . . . . . 

judge. l° n £ as t ne individual retains his right to do 

this he is a free man, but surrender it and 
he falls into the slave class regardless of birth, place, or 
position. For this reason it may be truthfully said that 
the most of mankind are in slavery. 

Self-inflicted There are those who bemoan their fate in so 
slavery. f ar ag cond jtions over which they exercise 

little control have restricted their liberty, but they are 
seemingly oblivious of the many forms of slavery which 
they have allowed to bind them in servitude, when by the 
proper assertion of themselves they could have kept free. 
Perhaps there is little slavery in existence that in the last 
analysis was not self-imposed either by tame submission 
or neglect to take at the proper time proper precautions 
against the loss of liberty. 



154 The Way Out 



Causes of The development of character and intelli- 

slavery. gence in the individual is the greatest safe- 

guard against slavery of all forms. The sources of 
greatest danger to individual liberty reside in the man 
himself. Greed, avarice, moral cowardice, inordinate 
love of pleasure or power, laziness and a lack of that com- 
mon honesty that is always willing to give a fair equiva- 
lent for what is received, undermine the foundation of 
character without which there can be no true liberty. 
Lacking this essential the aim is not for liberty but li- 
cense. 

Liberty Liberty, the greatest boon that God be- 

defined. stowed on man is not, as many seem to 

think, the freedom to do what one chooses, but is the in- 
disputable, inalienable right to do what one ought. It is 
the right under moral law to live one's life so that the 
highest and best in it may be fully developed, and to do all 
things that may appear to promote the individual good, 
recognizing that every other individual has a similar 
right, and that these rights can never conflict. When con- 
flict does arise it is an infallible indication that some 
one's right has been crossed and that a readjustment of 
relations is necessary. 

Complexity of The right of individual initiative is in no 
organization sense antagonistic to the practice of cooper- 
, not a . ation. As men combine, their relations be- 

limitation of , , . , -. , , -, , , -, . 

individual come complex and interdependent but this 
rights. is n °t a limitation of individual rights. It 

only requires more care in adjusting the 
social machinery so as to preserve them. It is absurd to 
say that man is under a moral obligation to work in con- 
junction in order to promote efficiency and at the same 
time admit that if he does so he must surrender his indi- 
vidual liberty — the right of initiative and individual 



The Individual in Co-operation 155 



judgment, the foundation upon which the hope of self- 
development must rest. No possible material advantage 
arising from cooperation could ever compensate for such 
a loss. 

Character The highest object of life is character-build- 

buiiding \ n g f a nd an y plan of social organization 

the object ^ a t runs counter to this eternal purpose 

of llfe ' will not stand the test of time. Deeply im- 

planted in every human being is a yearning for freedom. 
This instinct in the ignorant, the vicious and the willful 
may be misunderstood, distorted or abused, but it is there 
as an agency for the promotion and uplift of mankind. 
An enlightened mind and a well educated, sensitive con- 
science are required to guide it, but without it the race 
would fall dangerously near the level of beasts. 

It cannot be, then, that man loses his liberty as he 
comes more fully into a socialized state. All the indi- 
vidual right that he ever had was to be exercised with due 
regard to the rights of others. It proves nothing to say 
that social development is at the expense of individual 
liberty even if it is admitted that one may do 
The term j n & \ oweY s tate f civilization, where social 

nderstood" obligation is not so pressing and immediate, 
that which he may not do at all in a more 
highly organized environment. Such a view only demon- 
strates that the meaning of true liberty is not understood. 

True liberty consists in the right of all to do that 
which is in accord with moral law. It does not, however, 
grant to any the privilege of invading the rights of 
others. Liberty, then, is not license but is itself subject 
to law and must restrict itself to such exercise as proper 
regard for the rights of others may impose. Anything 
less than this denies the interdependence of man and dis- 
regards the social principle upon which the very exist- 
ence of the body politic depends. 



156 The Way Out 



Cooperation The law of association requires that closer 
for increased cooperation shall result in higher efficiency, 
e ciency. j^ ^- g ^ QQS nQ j. f u 0Wj ^he reason for joint 

action disappears. It is conceivable, and in fact is ad- 
mitted, that there are social restraints that are limita- 
tions upon liberty, but this only proves that the social 
arrangement is faulty, that there exists maladjustments 
which should be corrected. It does not prove that the 
greatest and highest good cannot be reached by the 
closest possible cooperation. On the contrary, common 
observation teaches that the best qualities of the individ- 
ual are developed not by leaving him alone but by bring- 
ing him into close contact with his fellows so that his 
social instincts may have opportunity for development. 
It is only by this process that the individual can be hu- 
manized. In no other way can the love of one's kind, the 
tender sympathy that distinguishes man from the brute, 
be brought Jnto play and become the means of unfolding 
the capabilities of the individual and conferring happi- 
ness upon those with whom he may come in contact. 

Life a call Besides, life is more than a struggle to pre- 
to duty. serve rights. It is a call to duty and it is 

quite as essential to the growth and happiness of man 
that he strive for others as that he shall do so for himself. 
He who would save himself must often do so by sacrific- 
ing himself for others. Man is a social being inextricably 
bound up in the social bond along with his fellow beings 
and therefore his best opportunities are to be found, not 
in contravention of the law of association, but in active 
obedience to it. 

Whether considered from the sociological or the eco- 
nomic point of view, the individual's best interest will be 
promoted by effective cooperation. The effectiveness of 
collective effort depends upon leaving the individuals en- 



The Individual in Co-operation 157 

gaged the greatest possible freedom of ac- 
w tion so that both their physical and mental 

powers may be applied. Principles should 
be explained and methods illustrated, but the individual 
operator should still be left the choice of method so that 
he might employ his powers of initiative to accomplish 
the task in the best way. He may, and doubtless will, 
make mistakes but from them he will get an experience 
that will prove valuable. Less than this does not make 
men but machines. The director may decree that the 
machine is to be turned but whether it be done by the 
right hand, the left hand or the foot should be left to the 
operator. 

Individuality demands that the choice of methods shall 
be left free so that personal initiative may have full play 
and count for what it can make itself worth. The ave- 
nues of effort must be kept open so that aptitude may 
find its place. This freedom of individual choice does 
not necessarily imply that one shall be left unaided, 
blindly to grope in search of the calling for which his 
natural capacity best fits him. On the contrary, effective 
cooperation makes necessary the provision of means to 
aid in every possible way the ascertainment of the indi- 
vidual^ capacity and aptitude so that he may know just 
what he is best adapted to do, and where the expenditure 
of his energies will likely yield the best results. 

Individuality Individuality, if rightly interpreted, can 
and never be in conflict with the law of indi- 

cooperation yidual bdng> The highest development of 

antagonistic, individuality can only be attained by con- 
formity to the law of effective labor, requir- 
ing as it does, the most thorough organization and the 
elimination of all that is unnecessary. Whatever of par- 



158 The Way Out 



adox there may appear to exist in this proposition is due 
to incorrect analysis and failure to understand the pro- 
cess of cooperative effort. 

Does collective It is claimed that monopoly abridges the op- 
effort abridge portunity of the individual, depriving him 
opportunity ? of the stimulus of hope . If soundj the charge 

lies against all forms of collective effort. If there exists 
any difference in this respect between monopoly and less 
highly developed forms of cooperation it is one of degree 
only. The fact that collective effort may render unneces- 
sary the performance of certain things, and it is ad- 
mitted, by no means proves that the avenues leading to 
individual success have been closed or even narrowed. 
The multiplication of wants superinduced by more effi- 
cient production, as was the case when power machinery 
was introduced, creates more jobs than the elimination of 
the unnecessary destroys. 

Cooperation He who works in collaboration with many 
gives j ias g rea ter opportunity to demonstrate his 

opportunity p r0 wess and is able to get much more re- 

to demonstrate * , . , . «. ; , , , -, , ., , 

™. rtma *« ward for his effort than would be possible 

prowess. r 

if he worked alone. It is not denied that ig- 
norance and abuse are often present in collective under- 
takings and that they cause injustice and hardship for 
individuals, but they do not inhere in the principle of 
combined effort. They are faults, not of the thing itself, 
but result from mismanagement and are evils and imper- 
fections to be eliminated as the evolution proceeds on its 
way to a realization of its proper development. That this 
is being accomplished is obvious even to the casual ob- 
server. Comparison of the condition of the less powerful 
but more numerous class of common workers now with 
that which obtained during any former period furnishes 



The Individual in Co-operation 159 

indisputable proof that better treatment and wider op- 
portunity are now accorded them than ever before. 

Human desire Implanted in every individual in varying 
to excel. degree is the desire to rise in importance 

and in the appreciation of his fellows. Without this qual- 
ity there could be no progress. Whether it manifests 
itself in the little boy who strives to win the game, to out- 
distance his playmates in the race or to learn his lessons 
better than they, or in the little girl who strives either to 
charm or be more proficient in her studies, or in men or 
women of more maturity who do their best to excel, it is 
the assertion of the ego. This is the divine urge given 
man to induce self-development and efficient perform- 
ance. It would indeed be destructive of hope of cooper- 
ative success if organization should destroy or even seri- 
ously impair this indispensable prerequisite to individual 
achievement. 

Increasing More and more keenly are the directors of 
appreciation cooperation recognizing that the success of 
V I "^i enterprise depends largely upon giving this 
worth individual incentive, direction and help. 

Jealousy, that bane of small minds, and per- 
sonal favoritism in many cases no doubt interfere in the 
apportionment of recognition and reward, but the reac- 
tions from such practices are gradually proving their un- 
wisdom. 

It is becoming increasingly clear to the intelligently 
selfish that the more correct policy of making merit the 
deciding factor in the matters of promotion and better 
pay is the true way to get the best results. Waiving the 
moral question and placing the matter upon the plane of 
cold and calculating selfishness, the directing forces of 



160 The Way Out 



collective effort cannot afford to do otherwise than to pro- 
mote the individual good of those who serve them because 
it pays to do so. 

Sycophancy It may have been generally true in the past, 
on the an( j jt ma y still be true in some cases, that 

decline. ^ e servile diplomat, hiding contempt under 

a smile of approbation, climbed over the heads of his fel- 
lows regardless of their superior characters and merito- 
rious achievements, but time is bringing corrections and 
the tendency is ever becoming more pronounced in favor 
of the recognition of merit and fitness. 

Greater Greater cooperation, dependent as it must 

complexity j^ U p 0n higher efficiency for its right to live, 
raises the necessarily compels a higher moral stand- 

standard ar( ^ ^' wnen transportation was con- 

ducted by the muleteer, the drunken driver 
drove his team over a precipice, destroying both himself, 
his team and his load, it was not a matter of much im- 
portance, but when the drunken engineer hauling a heavy 
train ditches it, it is a much more serious affair. In the 
latter case the greater loss of life and destruction of prop- 
erty that result from moral laxity compel the managers 
of transportation to demand a stricter observation of 
morality. The morals of neither the management nor the 
workers may be any better, but the exercise of morality 
becomes imperative. 

Even selfish- Reverting to the controlling principle of sel- 
ness serves. fishness, it will be seen that it goads men to 
higher standards because the evil that the indulgence of 
immorality superinduces costs too much to be tolerated. 
Can it be successfully maintained that this economic 
pressure that compels men to do right is productive of 



The Individual in Co-operation 161 

destructive tendencies that weaken individuality and 
curb initiative? On the contrary, does it not spur man 
on to do his best, to conserve his energies and to develop 
along the line of his particular aptitudes? 

Individual It is patent to all that, as effectiveness be- 
responsibiiity CO mes more imperative, individual responsi- 
mcreased. bility increases. When one, in a chain of 

specialists fails to do the part assigned to him, it inter- 
rupts the whole process, therefore it is quite essential 
that he shall keep himself fit so that there may be main- 
tained the continuity of operation upon which efficient 
production depends. Failing in this essential, the indi- 
vidual finds himself displaced. In a lower state of organ- 
ization the individual may be more lax in his methods. 
The improvident farmer may sit around the village 
blacksmith shop, frittering away his time discussing the 
local happenings, but the conductor on the fast train has 
too much dependent upon his prompt and careful atten- 
tion to indulge in diversion. 

Where is there greater need and opportunity for the 
development and use of intellectual power by all classes 
of men from the leader down to the lowest grade helper 
than is to be found in large operations? Where else can 
the wisdom that comes from experience be made so abun- 
dantly productive? Where else can such expertness be 
acquired, and when gotten, used so effectively? Organ- 
ization is merely an instrument that binds men together, 
but it is only framework and inanimate. The things 

that make it function are thought and ap- 
• /• -j i) plied energy, both furnished by individuals. 
importance 8 Tne thinking, planning, and executing find 

their origin in the brain of man. It is plain, 
therefore, that those who expect to be the beneficiaries of 
effective collective effort can no more afford to cramp the 



11 



162 The Way Out 



minds of men than the engineer can afford to put out the 
fire that makes his power. The interest of all will be best 
subserved by the highest possible development of thought, 
the widest dissemination of knowledge and the strictest 
observation of an elevated moral code. 

America leads The fact that America has reached a higher 
mmass degree of efficiency than other countries in 

pro uc ion. mass production is in no small measure due 
to the wider recognition and more general application of 
these doctrines to industry. Viewing human organiza- 
tion as an autocracy or even at best an oligarchy, the 
central authority sends out the power to all the consti- 
tuent elements of the organization. The success of the 
operation depends upon the proper functioning of this 
directing head. That which comes to the less important, 
subordinate elements is reflected power and judgment. 

Autocracy To change the figure, they are but sponges 

and that imbibe the fluid that flows out from the 

emocracy source and comes into contact with them. 

Under the more liberal democratic theory 

postulated upon the doctrine of mutual help 

for mutual service each member of the cooperation is 

equally free to think, to advise and to employ his power 

of initiative in order that the operation may be made as 

efficient as possible. 

Napoleon It has been said of Napoleon that he was at 

recognized a \\ times open to receive suggestions even 
in lvidual from the humblest soldier in his army and 
to give to worth the recognition due it. The 
efficiency and loyalty of his men, scarcely equalled and 
never excelled in any army before or since his time, were 
no doubt due in great measure to Napoleon's wise use of 



The Individual in Co-operation 163 

psychology. He did not drive but led his forces. He bound 
them to him as with hooks of steel by the simple process 
of making them conscious that he thought them men, not 
mere fighting machines. 

Equality of How much better it will be for all when the 
opportunity directing forces of the world come to recog- 
the safe n j ze ^ e e £ erna i truth that equality of oppor- 

foundation. , ., . ., , „ „ , ,. 

tunity is the only safe foundation upon 
which to base the hope of genuine progress. The lofty air 
and self-complacent aloofness to which men of little 
minds vested with power seem especially susceptible are 
unfailing signs of inferiority. Such men by their foolish 
attitude build a wall around themselves that shuts out the 
world from them. The more intelligent realize the need 
for the widest vision and appreciate the inestimable bene- 
fits that come from generous contact with life. These 
capable leaders will see to it that all the avenues of infor- 
mation are kept open to them so that judgment may be 
predicated upon a full knowledge of facts. They will 
insist, too, that those under them shall have light and 
knowledge, realizing that the broader and deeper the 
minds of those who cooperate with them the greater will 
be the capacity to produce satisfactory results. Holding 
up to their men the possibility of reaching the highest 
point that their capacity will permit, they will excite an 
emulation and loyalty that will bind their followers in a 
common bond to do their best. 

Under liberal guidance the individual worker will 
enjoy freedom of initiative to apply his own methods and 
will be rated according to actual results. He will receive 
the recognition and remuneration that his effort deserves 
and his just meed of praise will not be denied him because 
perforce it might encourage him to hope for a higher 
wage. 



164 The Way Out 



More just This intelligent leadership will be first to re- 

distribution by t urn £ thg wor k er his fair share of the iri- 
m e lgen crease resulting from higher individual effi- 

ciency. It will not be influenced by the fear 
that workers will learn too much and become dangerous 
in the employ of someone else, but it will strive to bring 
out the best that is in them and then make it to their in- 
terest to continue with it. By precept and example it will 
seek to teach correct economics so that all may know the 
benefits that follow increased effectiveness. Not sup- 
pression but development will be the slogan. 

Amity to dis- When this better grasp of effects has been 
place enmity, realized, class dissensions and hatreds will 
give way to amity and mutual regard, not necessarily be- 
cause men have become more altruistic, but because they 
will have become more intelligently selfish. Antagonism, 
hate, distrust, and revenge are elements of war, and 
everything connected with war is destructive. Man yet 
will come to learn that destruction is at his expense and 
not for his profit, and when once this truth has been 
thoroughly impressed, he, from sheer selfishness, if no 
higher motive, will refuse to permit it. 

Over Collective effort is fairly open to the criti- 

speciaiization. c j sm ^ a ^ [ n t ne struggle for higher effi- 
ciency in production it develops a strong tendency to over- 
specialization. If this process, highly necessary within 
certain limits, is carried too far it restricts unduly the in- 
dividual's opportunity to get that wider experience which 
is indispensable to correct judgment. It goes without 
saying that the individual who specializes can acquire a 
degree of proficiency that he could not possibly attain in 
doing diverse things, but it does not follow that each indi- 



The Individual in Co-operation 165 

vidual should be a specialist or even that an individual 
should remain the same kind of a specialist during life. 

Wide Cooperation, if it is to be highly efficient, 

experience needs men having general knowledge and 
necessary. experience as well as those who excel in a 
narrower sphere. Its managerial staff must be generally- 
qualified while its department workers should be special- 
ists in the things which they are to do. No rigid line or 
insurmountable barrier should be permitted to separate 
these two classes. The way should be kept open by which 
the members of each class may pass from one side to the 
other as the particular individuals demonstrated the apt- 
itude and fitness that might make the change advisable. 
To express it differently : the management should be such 
as to inspire in each worker the belief that his position in 
the operation depends entirely upon his own fitness and 
merit and that every place is open to him when fair 
chance and his own qualifications entitle him to it. 

To produce this effect upon the minds of the workers it 

would be necesary to make it fairly easy for the worker 

to select the class of work he prefers so as to 

chokeTf^ give him a11 the latitude that mi £ ht be 
task practicable in his effort to discover his apti- 

tude. This policy would not only serve to 
develop the specialist, but it would likewise permit those 
who want a more general grasp of the intricacies of the 
operation with the view of qualifying themselves for 
managerial duty to go through an apprenticeship in all 
departments that would qualify them for entering the 
broader fields. 



166 The Way Out 



Self- A system operated in accord with these 

perpetuating principles would likely be self -perpetuating, 
system. whereas under a less liberal plan the death 

or disability of a few of the more important managers 
would put the entire operation upon the rocks. Mani- 
festly, then, collective effort of itself does not militate 
against the development of the individual but, on the con- 
trary, furnishes him opportunities for service to himself 
and society that would not otherwise be open to him at all. 
Whatever" deprivation the individual may suffer in col- 
lective as contrasted with individual effort comes from 
maladjustment and abuse of the collective principle and 
not because the laws of cooperative effort make it neces- 
sary. The remedy lies in the development of intelligence 
so that the necessary adjustments and corrections may be 
made — not in the destruction or even the limitation of 
proper cooperative effort. 



CHAPTER X. 

MONOPOLY. 

Special Every social act must be in accord with the 

privilege a w [\\ f ^ e sovereign, which in a free society 
gran rom j g ^ e people themselves. The performance 
of any social act by a part of the people, 
either by the sufferance or the direct permission of the 
sovereign involves a privilege. The sovereign may grant, 
regulate, or withhold any such privilege unless it has 
limited its own power by constitutional provision and in 
such cases it can remove these limitations by whatever 
process it may have prescribed for repossessing itself of 
unlimited power. 

Sovereign It will be noted here that the power to grant 

rights privilege rests upon the premise that the 

y grantor has the unlimited right to do itself 
the thing which the privilege permits the 
grantee to do. In other words, society is self-sufficient 
and has the right and power to undertake the perform- 
ance of any function which it may decide to be essential 
to its own comfort and well being. Society, aside from its 
self-imposed limitations of power, which may be removed 
at will as already explained, has power to do any social 
act, or perform any service that is not in contravention 
of moral law. 

The exercise of the power of the sovereign by others, 
either by sufferance or direct grant, in no wise limits its 
right and power to reassume such functions at any time 
that public exigency may make it desirable to do so. 
Neither the direct act of the sovereign nor its permission 
to others to perform social service raises any question of 

167 



168 The Way Out 



legitimacy of function since the primary power and right 
are vested in the State and the method of exercise is 
merely a matter of public policy. When, as is sometimes 
the case, the legislative branch of government misuses 
the taxing power to destroy an undesirable social service, 
it is only doing by indirection and subterfuge that which 
it has full power to do by an act of direct prohibition. 

Ail social acts The assumption that there is any distinction 
public between services, classifying some as pri- 

service. ya ^ e J3 Usmess an( j others as public service 

is utterly without foundation. Any such division is nec- 
essarily arbitrary. The bootblack who shines the shoes of 
the traveler is as truly engaged in public service as the 
trunkline railway that takes him to his destination. They 
both, under private initiative, are exercising social func- 
tions under a permission which the sovereign may recall 
when it chooses to do so either for the purpose of confer- 
ring it upon others or assuming the functions itself. So- 
ciety through its organization, the government, whenever 
it chooses, may assume the duty, doing whatever it may 
wish done, and may deny, if it so wills, to any other 
agency the privilege of engaging in such service. 

Monopoly of Monopoly, with respect to its origin and life- 
force or principle, may be classified as monopoly of 
selection. force and monopoly of selection. Govern- 
ment, owing its origin to the majority consent of the gov- 
erned, belongs to the latter class while arbitrary govern- 
ment of whatever kind belongs to the former. So long as 
government represents the will of the people and the 
means for its expression exists, all monopolies within the 
boundaries of the country are those of selection, and they 
possess their privileges either because the public wishes 
them to do so or it is too indifferent to exercise its power 



Monopoly 169 



to get rid of them. Monopolies of selection, so far as the 
public regarded as a social unit is concerned, often be- 
come monopolies of force in their relations to the indi- 
vidual citizen. The possession of a patent, the ownership 
of natural resources, the command of the requisite capital 
and the economic superiority of concentrated control and 
single unit operation, as well as many other circum- 
stances, give monopoly the power to impose its will upon 
those who are dependent upon it for service. Especially 
is this true of private monopoly. 

Ideal Monopoly of selection is of course the ideal,, 

monopoly. existing by the will of the public and en- 

dearing itself to all because it is an agency of human 
service. Its motive is to reach the highest possible degree 
of efficiency and to distribute its benefits at the lowest 
possible cost. Monopoly as respects its ownership is di- 
vided into two classes, public and private. 

Social service As already explained, all social service 
under private under private initiative rests upon privilege 
initiative a w hich the sovereign grants or permits be- 

nrivilesre • 

cause of its unwillingness, inability or fail- 
ure to provide the organization necessary to afford ade- 
quate social service. The sovereign, however, reserves 
or should reserve the power to restrict, restrain, or pro- 
hibit all privilege and to establish its own agencies of 
public service whenever the welfare of society may de- 
mand it. So long as this power is retained by the public 
whatever of evil may arise is remediable, but once it is 
lost, the social body becomes an incompetent, subject to 
all the oppression that its masters may impose upon it. 



170 The Way Out 



The triumph of privilege necessarily means the destruc- 
tion of free government and all that it connotes. 

Laissezfaire Under the laissez-faire method the process 

involves f eliminating the multiplicity of small 

orce an units of service and substituting for them 

selection. 

the larger units involves the use of both 
force and selection. These entirely diverse methods co- 
operate to accelerate the speed of the evolution of social 
progress on its way to its ultimate goal — monopoly. 

The effect Any restraint, regulation, or control of 

of public privilege by the sovereign is in an economic 

regu a ion. sense an arbitrary interference with the 
natural method of its elimination. In other words, the 
effect of such interference is to lengthen the life of priv- 
ilege by retarding its growth. This policy, if adhered to, 
tends to crystallize the existing state of social growth and 
is analogous to the practice among some backward 
peoples of binding parts of the human body to prevent 
normal development. It seeks to preserve the subnormal, 
to keep society under an economic handicap, not because 
this is good for it, but because progressive development 
would stop the tribute that insufficiency compels it to pay. 

Society if society devoted a tithe of the time and 

usually talent to making provision for serving itself 

agains ^^ ^ ^ oeg ^ o vromotimg and making per- 

progress. , A n . , . . , 

manent unsound economic policies under 
which it must necessarily lose, progress would be much 
more rapid. These interruptions deferring as they do, if 
successful, the better possible adjustments of the social 
machine, may appear of great importance to those who 
value a few years or centuries, but considered as mere 



Monopoly 171 



ripples in the stream of infinite evolution they are incon- 
sequential, for no sooner do they begin to take effect than 
a counter influence is developed to overcome them. 

Greed defeats The beneficiaries of privilege, prompted by 
itself. inordinate greed, can very safely be relied 

upon to offset by their own injudicious acts all the benefits 
which may have been unwittingly bestowed upon them by 
an uninformed public. 

Special Special privilege, even under the pressure of 

privilege immediate self-interest, is not likely to look 

short-sighted. far ahead> Make nay w hile the sun shines, 

is its motto and its effort is unremitting to make as much 
as it can in the shortest possible time. Under these con- 
ditions it avails itself of every opportunity to strengthen 
its position, increase the size of its organization and dis- 
place its competitors. Blindly it may be, but faithfully 
it fulfills its destiny. 

Captains of In this sense, it may be truthfully said that 
industry f a n_ w h nave advocated the highest devel- 

promotersof p men t f the cooperative principle — Com- 

Sociahsm and . , ~ . t. .» ■■ , 

Communism niunism and Socialism, if one pleases to use 
these terms — the so-called captains of indus- 
try have done most to hasten the coming of the time when 
practical application of the full cooperative principle will 
become possible. Whatever may have been their motives, 
and there is little doubt that they were mixed, they are 
justly entitled to the distinction of having been path- 
finders who not only are making it possible for society to 
find its way out of the economic morass but are creating 
conditions that will compel it to go forward to the goal. 

The progress toward monopoly is of course not uni- 
form. Certain lines of activity naturally fall in the mo- 



172 The Way Out 



nopoly class. Some of these have already 
egermo j^^ p 0m ^ e( j ou ^ others, through an eco- 

monopolym , e . ' & 

all business. n °mic process of elimination of the unneces- 
sary gradually approach the monopolistic 
state, but all methods of social service have in them the 
germ of monopoly and their degree of approach depends 
upon the extent of their development. 

The public's When monopoly exists, the public is con- 
choice of fronted with the very practical question of 
choice between its two forms, private mo- 
nopoly based on privilege, or public monopoly whose right 
to exist rests upon its power to serve. The decision be- 
tween these two forms should rest upon very broad 
grounds. All elements should be considered and that 
form chosen which may prove the superior from society's 
point of view. These two forms of monopoly have certain 
things in common. Each requires an aggregation of cap- 
ital and a centralized control. Each must render service 
to the public. 

Public and Private monopoly gathers its capital by 
private promising the investor a profit on the in- 

monopoiy vestment. Public monopoly gets its capital 

through the government's power to tax. If 
bonds are issued, private monopoly offers its capital as 
margin, and public monopoly pledges the faith of the gov- 
ernment, which in turn rests upon the power to tax. The 
safety of the former investment depends upon the hon- 
esty and the efficiency of the management, while that of 
the latter depends upon the honor and stability of the gov- 
ernment. If the private enterprise fails, the stockhold- 
ers, unsecured creditors, and bondholders lose in the 
order named. If the public enterprise fails, the creditors 
are all paid and the loss is distributed through taxation. 



Monopoly 173 



Public Public enterprise, getting its capital by tax- 

monopoly's ation, since it is only requiring society to 
broader base p U ^ U p ^ e capital for its own service makes 
or . . . no pledge of return of either principal or 
dividend. If the capital is to be borrowed, 
the government offering greater security can float its 
bonds at a lower rate than any private organization. 
With reference to their respective powers to aggregate 
capital, private and public monopoly may be regarded as 
limited and unlimited partnerships. The former can 
only call upon its limited number of stockholders to con- 
tribute the specific amounts to which they may have com- 
mitted themselves, while the latter, embracing all the 
people, may call upon each of them to furnish all that he 
possesses. Private monopoly, not having the power to 
compel original contributions, must rely upon its appeal 
to cupidity to effect this purpose. 

Public Public monopoly in the size of the unit, the 

superior concentration of control and the ability to 

to pnva e command support is superior to private mo- 

monopoly. , Tj n • j j • 

nopoly. Its processes 01 integration are 
more efficient and less costly than those of private mo- 
nopoly. It is obvious that public monopoly with the abil- 
ity to gather its capital in larger amounts, with greater 
ease at less cost and under no necessity to earn a profit 
can operate with a lower fixed charge than private mo- 
nopoly. 

The principles These forms of monopoly conform to en- 
of public and tirely diverse principles. Private monopoly 
private must of necessity make profit its controlling 

monopoly . . •,-,-, -, •> 

different motive as its existence depends upon it. 

Service is secondary. Its ruling motive 

being gain it must give out as little as possible for that 



174 The Way Out 



which it takes in. In other words, it must put on all the 
business will bear. Public monopoly, on the other hand, 
aside from its power to serve, has no reason for its exist- 
ence. Private monopoly must serve but its ability to do 
so is limited. It must conserve its resources to the extent 
necessary to preserve its life and insure its growth. It 
cannot do this unless it charges a profit on the cost of its 
services in order to pay the higher wage of capital, to 
compensate shareholders for risks and in addition satisfy 
their cupidity to the extent necessary to induce them to 
continue the enterprise. Under these conditions it is only 
the benefits of the enterprise in excess of these require- 
ments that are available for distribution to the public. 

Private Under private monopoly, special privilege 

monopoly must first receive its reward, leaving the 

mus J s , e public to take what remains if there should 

serve itself 

be a remainder. It will not be seriously con- 
tended that private monopoly, combining only a small 
percentage of the people, having to pay higher for its cap- 
ital, appealing as it must to the cupidity of the individual, 
can possibly equal public monopoly in the matter of 
strength, since it embraces all the people ; or in economic 
efficiency of cost of organization and aggregation, as the 
latter is under no compulsion to earn profits to pay divi- 
dends on cash capital, and even if bonded capital is em- 
ployed it gets it at a lower rate. 

Private Private monopoly must also earn in addi- 

monopoiy ^j on ^ ^ e amoun t necessary to pay divi- 

mus exp 01 . (j en( j s an amount sufficient to provide for 
the growth and extension of the business. Public mo- 
nopoly, on the other hand, is under no such obligation. 
Having access to and command of the entire resources of 



Monopoly 



175 



the state or nation it can compel all to furnish their sur- 
plus capital to the extent that efficient public service may 
require its use. 

A contest The selection, as the evolutionary process of 

between elimination of the less efficient units of 

systems. social service was taking place, was between 

the less and the more desirable agencies of the same kind. 
They conformed to the same principles, which were of 
different degrees of development. The contest between 
private and public monopoly is different. It represents 
a competition between systems that are unlike. The one 
functions on the profit principle, or is capitalism carried 
to its logical ultimate, the other represents the highest 
economic development of the service system, under which 
production takes place at the public's risk and distribu- 
tion is made at cost. This contest, then, is the final test 
between these systems to prove which is the superior in- 
strument of social service and to establish incontestibly 
its right to displace the inferior. Either system possess- 
ing two things would seem to be fairly entitled to be se- 
lected as the superior; economic superiority in providing 
the organization and machinery for production, and the 
ability to make the most general and equitable distribu- 
tion of benefits. 

Private When it is considered that the aggregation 

, monopoly f the necessary capital to conduct private 

lacks moral monopoly must be accomplished either by 

foundation. taking . ag profit that which belongs to others 

without giving an equivalent value in return therefor, or 
by appealing to the cupidity of investors by holding out 
to them hopes of becoming beneficiaries of such unmoral, 



176 The Way Out 



not to say immoral, exploitation, it becomes apparent that 
private monopoly stands condemned on moral grounds. 

Private Practically all the shortcomings and evils of 

monopoly private monopoly are directly due to this 

by nature an j ack Qf mora[ f oundat i on . It ca nnot, if it 
exploiter 

would, be just. In its very nature it is an 

exploiter and its life and growth depend upon the success- 
ful continuation of the practice. This necessity forces it 
to make false statements minimizing its worth when the 
tax assessor appears and to make equally false claims of 
having value that it does not possess when rates are to be 
made. It also accounts for that peculiar, but not rare, 
phenomenon in psychology, illustrated in the state of 
mind into which public commissions sometimes fall, en- 
abling them to accept as true both of these palpable mis- 
representations. 

Private Private monopoly, an illegitimate, begotten 

monopoly anc [ \) 0Yn m unmorality, gravitates natur- 

gravitates ^-[y toward corruption. It is quite probable 

corruption that ^ s em pl°y m ent of the crude method of 
bribery is exceptional. Its methods are more 
refined as well as more effective. The possession of 
wealth gives it power which it unceasingly exercises to 
mislead public opinion, both by misrepresentation of 
facts and their suppression. By every method that in- 
genuity can devise it seeks to exercise its powerful influ- 
ence upon all branches of government to make it serve 
special privilege by enabling it to increase the exactions 
it makes on the public. It follows its immediate pecu- 
niary interest as persistently as the needle of the compass 
does the magnetic pole. Its direct interest is in promot- 
ing bad government in so far as that serves the purpose 
of increasing the tribute that it imposes upon the public. 



Monopoly 177 



It is the constant promoter of that which a 
government conducted in the interest of the 

government. fe tit • . -i 

whole people should consistently oppose. 
Its genesis being evil, like a cancer it continues to extend 
its roots through the body politic until it finally destroys 
the last vestige of society's power to function as a free 
and self-sufficient organization. 

Private Private monopoly, through the profit prin- 

monopoiy ciple carrying with it, as it eventually will 

has power of ^ ^ e control of regulatory effort, pos- 

tsxfltion 

without re ■ sesses the power of taxation without repre- 
sentation, sentation, a power which no free govern- 
ment itself can exercise. Not only does it 
have this power but it is under every incentive that hu- 
man selfishness can offer to exercise it tyrannically. No 
degree of efficiency that it might possibly develop in the 
financial and industrial fields could possibly compensate 
for that destruction of free society that must necessarily 
result from its existence. Under it an autocracy or at 
best an oligarchy of wealth would exist, but anything ap- 
proaching a democracy — never. 

Private Private monopoly has no flag, no country, 

monopoly j^ j ias ne ither loyalty nor allegiance. Its 

seeks to constant effort through an ever increasing 

conquer e concentration of control of the instruments 

world. 

of production and distribution is to widen 
its sphere of influence so that the people of every land 
may be brought under its yoke and compelled to pay tri- 
bute to it. 

Examples of The American railway systems, constantly 
monopolistic appealing to the people for more, are under 
ingratitude. ^p kijg a ti ns to the country for favors 
deserved and undeserved. If there is any institution 



178 The Way Out 



that should be desirous of protecting the national interest 
it is they. It is generally conceded that the need for an 
American merchant marine owned by the United States 
government is imperative — the welfare of the country 
demands it — yet the fact is that these systems of trans- 
portation have bound themselves under contract to dis- 
criminate against the merchant marine owned by the 
United States government and in favor of foreign lines. 

Special In a practical way special privilege recog- 

pnviiege's nizes no social claim as superior to its own 
esire desire to perpetuate its strangle hold on the 

whole world. Whether it be ruthlessly co- 
ercing a sovereign state to change its economic policies, 
as in the case of North Dakota, or throwing an interna- 
tional "cordon sanitaire" around a great nation to pre- 
vent the adoption of a different economic system and to 
compel the recognition and protection of its own, as in 
the case of Russia, or promoting disorder, as in the case 
of Mexico, it is simply following the law of its own devel- 
opment. 

Ignorance No one in particular is to be blamed. It is 

and neglect on jy t ne soc j a i cancer called into being by 
a au tf social incompetence, ignorance and neglect, 

devouring the healthy tissue of the body politic and has- 
tening the day when free government and civilization 
must make the final choice between displacing private 
monopoly by a more ethical economic system, or perish 
themselves. They and it cannot both survive. 

The inherent Private monopoly in respect to its power to 
weakness of distribute the benefits arising from concen- 
pnva e tration of control and cooperative produc- 

tion labors under serious handicaps. It 
must keep its earnings to the extent necessary to provide 



Monopoly 179 



for its growth. It must necessarily vest the ownership 
of its capital in the hands of relatively a small percentage 
of the population, thereby creating an aristocracy of 
wealth. It cannot reduce the price of its products to a 
cost basis, hence must continue to exploit the public. 

Both rich and It is admitted that the economic develop- 

poor richer men t un der the profit principle has dis- 

but greater tributed great benefits. It is true that the 

disparity . h ^ r i cne r than they ever were before, 

than before. . . „ , ,_ *.. • i „ 

but it is equally true that the poor are richer 
than they ever were before also, but it is likewise true 
that these classes, in the matter of wealth, are wider 
apart now than at any former period of history. It is 
fair, too, to say that the most of the increase in wealth is 
due to invention and the improvement in the machinery 
of production and distribution made possible by the 
greater aggregation of surplus capital. The fact that this 
increase of the sum of wealth has occurred under the 
profit system does not prove that the credit for the 
achievement of the result is due to this system, nor does 
it disprove the possibility of even better results under a 
more equitable system of aggregation having power to 
distribute benefits more generally as well as more equit- 
ably. 

Public Public monopoly is the highest form of co- 

monopoly's operation. Its ownership is general. There 
economic - g no p re f erre( j or privileged class. Each 

advantages. member f soc iety must contribute his part 
of the capital required, or if the capital is borrowed the 
interest charge is the lowest. The size of the unit is the 
largest that economic efficiency will permit, and so far 
as organization and equipment are concerned, the cost 
of the service should be at the minimum rate. The man- 



180 The Way Out 



agement is under no compulsion to charge for the risk, 
since if in the effort to distribute at cost through unfavor- 
able circumstance or mistaken judgment a loss should re- 
sult the monopoly can easily recoup itself by the very 
simple process of increasing the price for the service. 

If additional capital should be required from time to 
time to provide enlarged facilities to accommodate the 
growth of business, it can be acquired either by charging 
more than cost for the service or by means of taxation. 
In either case the people would be furnishing the means 
to conduct their own enterprise and their interest and 
title would remain the same. They, as partners in this 
social undertaking, would only have devoted so much of 
their capital to a cooperative enterprise, the benefits of 
which would be enjoyed by all. No part of the contrib- 
uted capital would become the property of another indi- 
vidual or class, and therefore the operation would furnish 
no opportunity to any member or class of society to get 
rich at the expense of someone else. 

Private The accumulation of wealth by individuals 

accumulation WO uld still take place, but each of necessity 
un erpu ic wou id \y e compelled to limit his accumula- 
tions to that which he saved out of his own 
earnings as none would have the opportunity to appropri- 
ate those of someone else. It is highly probable that the 
total sum of national wealth would be greatly increased 
but the actual ownership would be vested in the many in- 
stead of the few. Millionaires and multi-millionaires 
under the service system would become as extinct as the 
dodo. There would be no legitimate way by which very 
large individual fortunes could be amassed and the pos- 
session of them, instead of being an honorable distinc- 
tion as at present, would be prima facie evidence of the 
holder's fitness for the penitentiary. 



Monopoly 181 



No social After the service system began to function, 

necessity there would be no social necessity for 

for large swollen fortunes in private hands, and their 

fortunes. existence could no longer be justified upon 

the only ground that makes them tolerable at present, 

viz. held in trust for the social ward that so far has not 

developed sufficient capacity to take care of itself. If 
society should feel offended at the characterization, it 
would do well to appreciate that the reflection, if there is 
any, inheres in the fact rather than in the statement of it. 

Public Public monopoly with the combined re- 

monopoly sources of the nation to support it is the 

the highest strongest economic organization that can be 

rTment g° tten to g ether - Nothing that the human 
mind has so far conceived is comparable to 
it in this respect. Ocular proof of this fact is given when- 
ever a nation has to face a great danger such as a war 
with some other powerful nation. It is unthinkable that 
the nation would under such circumstances employ less 
efficient instruments, and the fact that it flies to adopt 
the principles of public monopoly at such times proves in- 
contestibly that its guiding spirits are thoroughly con- 
vinced that the doctrine here set forth is sound beyond 
question. If they are not so convinced and extend the 
functions of government, believing that the policy makes 
for inefficiency, they are guilty of giving aid and comfort 
to the enemy and under the laws of the country should be 
shot for treason. 

The pressure It is perhaps nearer the truth to say that 
removed, when the entire nation is threatened with 

society reverts common devastation, all classes for the 
-to special nonce forego whatever of special privilege 

pnvi ege. ^ at the neceS sities of the situation may re- 

quire and cooperate to that extent for the general good, 



182 The Way Out 



but as soon as the danger passes, the more intelligent in- 
dividuals, who are usually directly or indirectly the bene- 
ficiaries of special privilege and who primarily initiate 
public policies, begin by specious reasoning, and mislead- 
ing propaganda to tear down the public service organiza- 
tion that necessity drove them to adopt, and reinstall the 
instrumentalities that have served so well in the past to 
divorce the masses from their rightful earnings. 

Assaults upon The opponents of public function rarely at- 
pubhc admin- i^ok the principle but concentrate their as- 
sault upon the inefficiency of public admin- 
istration. They are usually especially insistent that it is 
wasteful, inefficient and even corrupt. These objections 
would indeed be exceedingly forceful if they were true, 
but are they true or are they merely bugbears to frighten 
and beguile the simple? If the allegations are true as re- 
gards public services of the socialistic class (or such as 
are performed cooperatively but paid for by the individ- 
uals receiving the service) , why are they not equally true 
of the purely communistic services performed coopera- 
tively and paid for by the state? The only difference be- 
tween these services is in the source from which the com- 
pensation for the service is derived. As civ- 

Communistic ., . , , . . . . „ 

administration 1 l lza ^ 10n advances, the communistic func- 
tions of government continually multiply 
and expand. The free schools, public health activities, 
asylums for the deaf, dumb, blind, epileptic, infirm, 
crippled, and poverty stricken, departments for research, 
the promotion of agriculture, manufacture, and com- 
merce are rapidly assuming more and more importance, 
yet from no source does there arise serious objection. It 
is the exception to find that mismanagement, corruption, 
or fraud is charged against them, and if such a case 
arises it receives summary treatment and correction. 



Monopoly 183 



Improvement Instead of these activities becoming a stench 
in service j n the nostrils of the public, the constant 

the rule. tendency of their evolution is toward 

cleaner and more efficient administration. If the mere 
fact of government operation of enterprise must produce 
the horrible conditions predicted by them who oppose 
it, why do not these communistic operations carried on 
by the government show these defects and furnish the 
horrid examples that would arouse a decent citizenship 
to demand that all such undertakings should be taken out 
of the hands of the government and turned over to pri- 
vate corporations to be operated on the profit principle? 
The answer is simple. The public mind and conscience, 
quickened by the emotional nature that finds its expres- 
sion in communism, have reached a degree of develop- 
ment that will not permit private greed to exploit institu- 
tions intended to serve the dependent elements of society. 
The profit principle is not allowed to enter into these do- 
mains and in its exclusion, the abuses, corruption, and 
fraud so glibly predicted of government operation are 
also excluded. 

It is, as has already been observed, surpassingly 
strange that the supposed deficiencies and dangers of 
government operation are only to be expected from those 
services which private parties can make vehicles for pri- 
vate profit. If half of the charges which the 
The opponents op p 0nen t s of government operation bring 
of government againgt it are true , the quickest as well as 

i^coMstent. the surest wa ^ to Settle the matter for a11 
time would be to demonstrate the truth of 

them by a fair trial of the operation. When this is pro- 
posed as to any specific service, these prophets of evil, 
trembling for the public safety, shift their position and 



184 The Way Out 



inquire if this particular thing is done, where will it stop? 
The more intelligent and therefore the leading class of 
objectors to the extension of government function, it is to 
be feared, is composed of lineal descendants of the copper- 
smith family, who lauded Diana of the Ephesians not so 
much because of their devotion to the goddess, as for the 
more practical reason that her worship had a stimulating 
and sustaining effect upon the shrine market. 

Progress by The progress of civilization has largely re- 
empincism. suited from empirical effort. Man learns 
more rapidly and more thoroughly in the school of experi- 
ence than anywhere else, and it does seem that those who 
are so deeply convinced that the highest possible develop- 
ment of the cooperative principle, which necessarily ex- 
presses itself in government operation, is fraught with so 
much evil, could not do a better service than to assist in 
bringing the matter to a practical demonstration and 
proving their contention to the satisfaction of all. Their 
unalterable and implacable opposition to 

°ToT blic such a course raises a question of g00d f aith ' 

us y f and suggests that their opposition may be 

fear it might prompted by a fear that the experiment 

succeed. would succeed rather than by a desire to 

shield society from the evils that they claim 

to believe would result from its trial and failure. 

Happily, the case for the full evolution is not so des- 
perate as to be compelled to rely upon theory alone to 
sustain it. Owing to the slow rate at which economic 
evolution has proceeded in past ages, due in large meas- 
ure to lack of means for rapid transportation of persons 
and products and quick transmission of intelligence, 
highly organized industry and commerce were impos- 



Monopoly 185 



sible, but with the advent of invention the 
The evolution evo i u ti on was speeded up, and the rate of 
forward by progress within the last half century has 
invention. been accelerated more than in all the centu- 

ries of the past. 

Cooperative development has met less opposition in 
communistic lines than in other things, hence has passed 
more rapidly through the stage of private initiative into 
that of public operation, but in all services from which 
capitalism could exact tribute, the most strenuous and de- 
termined effort has unremittingly been made to throw ob- 
, structions across the channels of evolution- 

opposition. ar y P ro g r ess, with the result that the intro- 
duction of public ownership and operation 
has been greatly retarded. The effect has been to dam up 
the stream, so to speak, and amass a great force that 
must at sometime overcome the resistance and sweep on 
to its ultimate objective but the faster for having been 
unduly delayed. 

Forces of The f orces of reaction, exert themselves as 

reaction ^ e y cou id ? have not been able to hold every- 

^ o a 1 b u 1 t e . o t ° stop thing back. Here and there this or that 
utility has managed to find its way into the 
forbidden field of public enterprise. The results have not 
been so frightful as to deter others from undertaking 
similar adventures nor to stop the tide of public opinion 
in its steady but resistless march onward. It is no doubt 
true that some of these experiments for various reasons 
have not been satisfactory, but it is perhaps doubly true 
that a far smaller percentage of the total number of the 
public undertakings launched have failed than of those 
undertaken by private parties. A very large percentage 
of all the railroads and large public utility companies of 



186 The Way Out 



the country at some time in their history have broken 
down, passed through the hands of receivers and reor- 
ganized. 

The death if the death rate of public ventures was one 

rate of public tenth as high as that of private enterprises, 
ven ures ess ^ e figures would be paraded as indisput- 

than that of . . . .. . , x . , . 

private a "* e evi0 -ence that government ownership 

and operation were hopeless failures, and 
that no body of people outside of insane asylums would 
seriously contemplate adopting a system so thoroughly 
discredited by actual test. 

steady Notwithstanding the strenuous efforts of 

growth of the beneficiaries of the profit system to pre- 

sentiment or yen £ ^ e g r0 j W fl :l f p U blic opinion favorable 

ownership ^o Public ownership, it is slowly but surely 
becoming more widespread, and here and 
there has translated itself into action. These public un- 
dertakings may be regarded as the advance agents of the 
many that are to follow as general intelligence increases 
and the civic conscience is quickened by the increasing 
pressure of economic necessity. The cities have made 
greater progress than the states or nations in taking over 
their public utilities. Water, light, heat, gas, street cars, 
and perhaps other utilities, have been acquired and oper- 
ated by cities and the practice is growing. Nowhere are 
there noticeable signs of recession. 

state The field for action by the individual states 

opportunity j s somewhat restricted in that the most of 
restncte . ^ e units with which they would be expected 
to deal have become national and even international in 
their scope. Only the national government could com- 
mand sufficient resources and power to operate efficiently 



Monopoly 187 



the giant combines and monopolies that not only reach 
every corner of this country but are rapidly extending 
their spheres of operation to all parts of the earth. 

General It cannot be said that the general govern- 

government's men t has made much progress in this par- 
p ^ e favors ticular field. It has greatly extended the 
monopoly scope of its activities but has confined them 

largely to the effort of assisting the develop- 
ment of private monopoly rather than building up an or- 
ganization of its own to give better public service. It has 
gone to unreasonble lengths to foster railroads in private 
hands, and it has abdicated its constitutional place as the 
agency for furnishing a banking and currency system in 
favor of the so-called Federal Reserve and National 
Banks, which are not national in any true sense but only 
private institutions chartered by the Federal government 

on the assumption that they are assisting 
Character of ^ e government in the performance of a 
_ e er , public function. They are not public service 

Reserve and A 

National institutions but instruments by which spe- 

Banks. cial privilege lays and collects tribute from 

the public. Profit is their principal object 
and service to the public the incident. 

The great world war was fought ostensibly to make the 
world safe for democracy, and in some notable cases it is 
suspected that in order to make democracy doubly safe 
some of its most earnest exponents who had committed no 
overt acts were put in jail for the expression of honest 
opinion, and all of them more or less intimidated. While 
this altruistic war was being fought and since its close, 
special privilege has made greater strides than in any 
similar length of time since the eviction of our great 
grandparents from the bowers of Eden. 



188 The Way Out 



The need of Before the war the commercial flag of 
a merchant America was somewhat of a curiosity in the 

harbors of the world. America's interest 
in ocean traffic was confined to international traders and 
bankers of American citizenship who had become inter- 
ested in foreign merchant marines. This country was 
almost entirely dependent upon foreign bottoms for the 
means of ocean transportation. The destructive work of 
the submarine drove the government to build merchant 
ships, and sums variously estimated from three to four 
billion dollars were spent for this purpose. The need for 
this merchant marine in time of peace, no less than in 
war, was urgent. Being an exporting country, every con- 
sideration of national welfare demanded that there 
should be a merchant marine that could carry its exports 
and bring its imports at the lowest possible costs, so as to 
enable the country to exchange its goods with other na- 
tions under the most favorable conditions, yet with all 
these facts and reasons open to them, both the legislative 
and executive branches of the government concurred in 
spending these enormous sums of the people's money to 

build a merchant marine with the avowed 

e raya o purpose of surrendering it as soon as the 

trust urgent necessity that caused them to build 

it had passed, to private interests which 
could not be other than international private monopo- 
lists ! Was there ever before in all history so bounteous 
an offering placed upon the altar of the Moloch of organ- 
ized greed? At what prices were these ships to be sold 
to private interests? Billions less than they cost. What 
were the shameful and shameless acts of the administra- 
tion of the whole affair? A congressional committee 
lately unanimously refused to recommend an investiga- 
tion, certainly not for the reason that there was no need 



Monopoly 189 



for it. The true history of the sordid and criminal trans- 
actions connected with the affair will not likely be pub- 
lished, but enough is known to cast a lasting reflection 
upon the vision and patriotism of those who were respon- 
sible for the public policy involved, and to pillory some 
who were guilty of rank betrayal of public trust. The 
building of this great government merchant fleet fur- 
nished the opportunity for organizing and operating a 
great international service, the benefits of which would 
have followed America's trade into every country. Fu- 
ture generations will look back upon this lost opportunity 
as marking the acme of evil accomplishment on the part 
of the spirit of capitalism, which beclouded the vision and 
unbalanced the judgment of those whose 
Capitalistic sacre d duty it was to guard the public inter- 

obtession^ est In an evil h ° Ur the PUbHC £ uardianS 
slept at their posts. Even now it is not too 

late to gather from the ruins enough to establish a na- 
tional merchant marine that could be made one of the 
country's most valuable assets, but alas, there is none 
whose voice is sufficiently strong to arrest the attention 
of a nation that is obsessed with an insane desire to pre- 
serve at all hazards the opportunity to prey. Dominated 
by the spirit of capitalism it madly rushes on, hugging a 
delusion that time and circumstance in the appointed 
time will inevitably dissipate. 

Parcel post Under pressure from agrarian interests the 
, opposed. Federal government put the parcel post into 

operation. This was done against the solid protests of 
the commercial elements. These classes protested that 
such a method of distribution would be fatal to the or- 
derly progress and success of so-called private business. 
The system has been purposely restricted to prevent its 



190 The Way Out 



growth, but even under this handicap the 

e system yer y p e0 pi e w h protested most have come to 

restricted realize that its effects are beneficial, and 

while it is only a mere skeleton of what it 
might have been, there is none who would now dare pro- 
pose its abolition. This being true, one would suppose 
that public clamor would compel the extension of the 
service so that the highest possible efficiency and the most 
general benefit might be realized, but not so. The masses 
seem satisfied to let the system remain in a state of ar- 
rested development, illustrating the fact that the public 
will keep as much of a service system as time, chance, and 
economic necessity may ram down their throats, but are 
as yet lacking in the requisite initiative to extend the ap- 
plication of a principle even after its application has fully 
demonstrated its practicability and worth. 

The zone During the introductory stages of parcel 

system. p 0S ^ ^he zone S y S tem of charges was inaugu- 

rated, under which the rates in close zones were made 
sufficiently reasonable to permit traffic while in the more 
distant they were sufficiently high to drive the business 
to the express companies. The explanation oftenest 
heard at that time was that the policy was to restrict the 
volume of business coming to the parcel post system be- 
cause the government had not yet had time to develop 
sufficient organization to take care of it. Although many 
winters have passed since that time, yet the same policy 
is adhered to. Is it still the purpose to force patronage to 

the express companies and if so, why? The 
it grow ? parcel post system should make its rates to 

cover cost and provide whatever organiza- 
tion that might be necessary to take care of the business 
that came to it. Less than this is unjust to the public 



Monopoly 191 



service principle and must have the effect of fostering 
special privilege at the public's expense. 

Socialistic Social activities falling in the socialistic 

activities. c i ass are those which employ cooperative 

method on the productive side and distribute benefits in- 
dividualistically, i. e., return to the individual a just 
equivalent for that which he contributes. This is Social- 
ism. All business under private initiative operated cap- 
italistically conforms to the socialistic method, and in so 
far as its claims to pay a just wage and sell its wares and 
services at a fair price are justified by fact it is Social- 
ism. It has already been shown, however, that it cannot 
make good its claims and live under Capitalism. The 
point is now that capitalistic business is private Social- 
ism, which on account of its inherent defects must of ne- 
cessity bestow the greater part of the benefits upon the 
few. 

Private The question is not whether there shall be 

Socialism Socialism or non-Socialism, but whether 

or pub ic there shall be private Socialism for the ben- 

which? e ^ °^ ^ ne ^ ew or P u ^i c Socialism for the 

benefit of the many. Private Socialism 
creates class divisions, putting the overlord on one side 
and his dependents on the other, the first receiving the 
lion's share and the latter taking what is left. Public 
Socialism demands that all shall be fellow-servants co- 
operating for the public good, and that each shall receive 
his fair share of the benefits based upon his own contri- 
bution. Socialism, then, is inescapable. It 
ocia ism | g a j rea( jy established and can only be dis- 

established placed by the substitution of actual anarchy 
or thoroughgoing Communism in all social 
relations. However desirable these may be in their par- 



192 The Way Out 



ticular spheres, either of them is utterly unthinkable, not 
to say impossible, as a general social policy. Socialism, 
then, society must have in the sphere to which it is 
adapted, and the only thing open to discussion and choice 
is whether it shall be under private or public initiative — 
whether selfish greed shall dominate it, or it shall func- 
tion in accord with the service principle. 

As already indicated, the movement toward public 
initiative has been very slow. Especially is this true of 
the larger national and international units of production 
and distribution. While greater progress has been made 
in this direction in some other countries, in the United 

States the postoffice department is the only 
department thing of this character that may be said to 

have developed normally under public initi- 
ative. This is possibly due to the fact that it was intro- 
duced in the formative period of the nation's history long 
before its capabilities for exploitation were even sus- 
pected, much less appreciated by capitalistically-minded 
profit mongers. Its early birth accounts for its length of 
life. It became a fixture, an institution too well known 
to be taken from the public without their knowledge. It 
was quite common, however, in the past, before so much 
of the inefficiency and integral rottenness of railroads 
and express companies had been exposed, to hear the 
opinion expressed that the postoffice in private hands 
would show great improvement over government opera- 
tion. That the postal administration could be greatly im- 
proved is readily conceivable, but that it is in all respects 
ahead of any private operation of similar magnitude is 
not to be doubted. 



Monopoly 193 



Arguments When the extension of the functions of gov- 
agamst ernment is proposed, the objection is usually 

extension of UY ged that maladministration and political 
function corruption would superinduce inefficiency to 

a degree that would overbalance whatever 
of benefit that the superior principles involved might 
make possible. The past history and present state of the 
postoffice department furnish the best example of the 
practical application of the service principle, as well as 
the surest standard by which a correct judgment of the 
force and truth of the objections urged can be reached. 

The post office The postal system was inaugurated more 
public than a century ago. It has been in continu- 

Sociahsm. QUg p era tion since it was started and it has 

had time and opportunity to develop its strong points and 
expose its weaknesses. It began when social cooperation 
was at a low ebb and has come up through a period of 
rapid socialization under private initiative, and therefore 
offers as nothing else that is nation-wide in its scope does, 
the example of what Socialism under public initiative will 
do if given a fair chance to evolve according to the prin- 
ciples that govern its development. 

Jefferson's Thomas Jefferson, writing to either Madi- 
distrust of son or M onroe prior to the beginning of the 
postal system. nineteenth century, said that he kept the 
letters by him for three weeks waiting to get some friend 
to bring them, because the post office officials had been 
opening his letters, publishing the contents in the news- 
papers. To-day, the highest and the lowest alike entrust 
their correspondence to this agency with never a doubt 
that it will be carried to its destination and safely deliv- 
ered to those to whom it is sent. 



13 



194 The Way Out 



Postal The postal system had its inception in ineffi- 

history its ciency, disorganization, and corruption, and 
best witness. j iag s tead.Ily grown in capacity for service, 
in degree of efficiency and in moral tone, and stands 
easily at the head of large agencies designed to do public 
service. Although it has constantly increased the number 
of its employees, the difficulties and disturbances incident 
to adjusting differences between employers and em- 
ployees have not resulted. A general tie-up of its opera- 
tion by labor unions or even a threat of it would no more 
be expected than any other unheard-of happening. It has 
never shown any signs of desiring to impose unreasonable 
rates upon the public it serves, but, on the contrary, has 
constantly extended its service and steadily reduced its 
charges. During the great war it advanced the rate of 
postage fifty per cent as against one hundred per cent to 
many hundreds per cent by private enterprise, but imme- 
diately after the war it reinstated the prewar price. Its 
history is an effort to give all the service possible, making 
the least charge consistent with the cost of it. It has not 
found it necessary to pay exorbitant returns to a pre- 
ferred class and therefore has never made in all its his- 
tory a single millionaire. If anyone should succeed in 
getting a million out of the post office business the chances 
are good that he would have time to regret it while serv- 
ing his term in some Federal penitentiary. 

Private Here may be noted the striking difference 

and public between Socialism under private initiative 
°T 1& Ta an( * ^ oc i a ^ sm under public initiative. The 
first, used in the interest of special privi- 
lege, demands that the few shall gather more than they 
have a right to, and the degree of their success is deter- 
mined by the amount they have abstracted from the pub- 
lic, while under the latter service alone is the test of sue- 



Monopoly 195 



cess and any accumulation by the individual above what 
a just wage would make possible would arouse suspicion 
and invite searching enquiry as to the source from which 
it was derived. In other words, under private Socialism 
the managers of the postal system would be expected to 
take millions from the people and would be much re- 
spected if they succeeded in doing so, but under public 
Socialism if these same managers, doing the same public 
service, took the same amount from the same public they 
would be considered thieves and robbers and would be 
straightway sent to penal institutions, there to grow pre- 
maturely old in the effort to unravel the hitherto unex- 
plained mystery why it is creditable to despoil the public 
by one method and damnable to do the same thing by a 
different method. 

Public The postal system is a department of gov- 

function not ernment, and if political corruption must 
a cause of result from government ownership and op- 

eration, it could not possibly escape. With 
more than a century of history it should surely exhibit 
by this time enough of such evil effects to make of it a 
horrible example — a veritable stench in the nostrils of all 
good citizens. 

Private Every private interest of any magnitude 

Socialism a an( j a u c i ass interests have their lobbyists 
direct cause on g Uar( j e ither to prevent unfavorable leg- 
corrup ion. j s i a ^ on or to promote that which they re- 
gard as favorable. If half that is told of them be true, 
their efforts are not always restricted to proper methods 
but they promote their purposes by bringing to bear the 
most powerful influences they can command. Not only 
do they undertake to influence legislation at the Capital, 
but they start at the source by influencing the public 



196 The Way Out 



through propaganda and by shaping the policies to be put 
forward in party platforms. Private Socialism is always 
up to its ears in politics because its life depends upon its 
ability to preserve the privilege of levying tribute. 

Public Not so with public Socialism and its best ex- 

Socialism ample, the postal system, as it can function 

does not successfully without resorting to these de- 

political vious and doubtful practices. It is there- 

power. ^ ore n °t difficult to understand why this 

system has never used its power to elect a 
United States senator, while it requires no stretch of the 
imagination to believe that private Socialism has left no 
stone unturned to fill every position from the United 
States Supreme Court, the Presidency and Congress 
down to the local magistracy with its friends whenever 
it was possible to do so. Even when no corruption is in- 
volved, and corruption is not here intimated, the point of 
view — the bias of mind — is vitally important. 

The constant tendency of the postal system has been 
to get farther away from politics. A quarter of a century 
ago the fourth class postmaster was the leading political 
henchman in his vicinity of the party in power, but now 
none is so poor as to do him political reverence. No one 
cares what he may think or do in a political way. 

Unaccountable The strange and unaccountable thing is that 
public thjg g rea t system functioning on the service 

o useness. principle, covering the entire country, going 
into every hamlet and bypath, rendering a highly accept- 
able and satisfactory service to all at most reasonable 
rates, has not educated the people to a better understand- 
ing of the principle and caused a more general demand 
for the extension of it to other services. It is no compli- 
ment to the intelligence and initiative of the average cit- 



Monopoly 197 



izen that it has not done so. It indicates at least that the 
power of the masses to make correct inductions from 
known effects, if it exists at all, is as yet in a low state of 
development. 

The public's The failure of the general public, who would 
lack of kg tkg beneficiaries, to initiate movements 

to increase public functions is additional 
evidence that the capacity to originate and initiate is 
peculiarly reserved to the few. The masses are incapable 
of it and will perhaps always remain so. They are de- 
pendent upon leadership for suggestion and guidance. 
This being true, shall it not be concluded that democracy, 

a government of, by, and for the people is 
possible? an impossibility? By no means. The people 

need leaders but these in turn need follow- 
ers, and the greatest present need is for intelligent fol- 
lowers, whose chief and all-important tasks are to select 
leaders and to veto results when the latter may prove un- 
satisfactory. This power to negative the unsatisfactory 
results of leadership is by far the more important, and 
as long as the people retain this power there is hope of 
orderly democratic progress. Once it is lost, the masses 
become slaves. 

The masses Admittedly the masses have not the under- 
lack standing of principles, the well balanced 

nn ers an mg j U( jg me nt and inventive faculty to devise 
new methods. Once invade the field of ab- 
stractions and they are helpless and hopeless, but when 
the theorists have reduced their propositions to the con- 
crete, put them into every-day practice, the 
e masses masses are the most correct judges of ef- 
of effects fects, and as long as they find an effective 

way to register their will, once having tested 
the matter by experience, social safety is assured. De- 



198 The Way Out 



mocracy properly organized gives freedom of action both 
to the initiatory and veto powers — each equally necessary 
in its respective sphere. As long as they cooperate the 
ship of state is reasonably safe. Arbitrary government 
lacks the corrective, conserving influence of the public's 
veto power, and mob government lacks intelligent leader- 
ship, hence under neither form can permanent social pro- 
gress be reasonably expected. 



CHAPTER XL 

CURRENCY AND BANK CREDIT. 

Barter Naturally the first method of exchange was 

dependent on barter. The extent of this interchange of 
transportation. p ro( j uc t s was governed by the facilities for 
transportation. The practice of exchanging the bulkier 
products for those of less weight and more value, in order 
to use the latter as media of exchange, doubtless owed its 
origin to the effort to remove the necessity for transport- 
ing the heavier and more bulky articles, when they could 
be obtained nearer the point of need simply by exchang- 
ing the lighter and more precious articles for them. 

Precious The finer metals and precious stones were 

metals and fe^ adapted to this purpose, requiring of 
stones refined course some assurance of their actual con- 
tents and degree of fineness. In the course 
of this refined barter — and the use of material substance 
having in itself the value for which it is exchanged is of 
necessity barter — some acceptable authority, if requisite 
confidence is to be given, must become sponsor for the 
weight and fineness of these instruments of exchange by 
barter. Otherwise the faith necessary to the efficient con- 
duct of the exchange operations would be lacking. 

Government The recognition of this need led to various 
certification methods of having the metals intended for 
of weight and uge j n exc h an ge bear evidence of their own 
character and contents. By a process of 
elimination governments finally became the agencies for 
performing this very necessary service. 

199 



200 The Way Out 



Gold coin The American gold dollar is only a piece of 

barter. g j^ an( j j^e s tamp of the United States gov- 

ernment simple certifies that it contains 23.22 grains of 
pure gold, is nine-tenths fine and weighs with the alloy 
25.8 grains. The fact that the gold dollar is of a given 
weight and fineness and is presumed to equal the value 
of the American unit of value called the dollar, does not 
of itself change the character of the gold, which remains 
a commodity and an article of barter. 

Payment in it is obvious that payment in gold is not dif- 
goidnot ferent from payment in wheat, corn, iron, 

i erent rom Qr an y j^ er ma terial substance. This use 
other °^ ^ ne fi ner metals as media of exchange, or 

products. to express it differently, this bartering of 

heavier commodities for the lighter, not for 
possession and consumptive use of the latter themselves 
but merely for use as a means of economy in transporta- 
tion, making possible the bartering of bulky and weighty 
commodities with greater ease and facility, has given rise 
to the mistaken opinion that they are money, or repre- 
sentatives of value in a system of exchange in which mere 
evidences of title of value pass current and which are con- 
vertible on demand into material or real value. 

Gold no This use of gold does not entitle it to be con- 

proper sidered as forming any element of a proper 

cement in system of credit exchange, because barter 
exchange involves no element of credit. It, in common 

parlance, is swapping one commodity for 
another and it in no wise changes the character of the 
transaction if gold should be one of the products ex- 
changed. 

It is of course understood that a coin whose metal con- 
tents are worth less than its exchange value but which 



Currency and Bank Credit 201 

exchanges for a greater value merely because a govern- 
ment guarantees its redemption at its ex- 
Token money. Ill -7 1 1 •! 

change value has a composite value, and its 
use involves barter, to the extent of the commodity value, 
and credit exchange value for the balance. The employ- 
ment of the two different principles of exchange in a 
given case adds no value to the actual product further 
than that the practice may enlarge the use of the metal 
for such purpose. 

Circulatory if the silver in a silver dollar has a corn- 
value and modity value of fifty cents it would circu- 
— late afpar with gohfas long as the govern- 
ment guarantee of dollar value was ac- 
cepted, but let revolution destroy faith in this guarantee 
and the silver dollar would at once fall to its commodity 
value. 

Confidence The value of credit exchange depends en- 
and faith tirely upon faith and confidence. Belief in 

givevaue ^ ^jjj^y an( j p Ur p 0se f the emitters of 
exchange credit exchange to have it redeemed on de- 

mand is an indispensable condition to the 
successful and efficient operation of any system of credit 
exchange. 

Currency and Discarding for the sake of clarity all forms 
bank credit. f barter, however refined, whether the ma- 
terials are used as media of exchange or not, the currency 
and bank credit system will be considered as one which 
employs purely representative or intangible values to 
stand for material values, into which these representa- 
tive values can be transformed at will by the holders. 
When this conversion takes place, it automatically liqui- 
dates and retires the credit instrument. Credit exchange 
after all is but the shadow of the product put into the 



202 The Way Out 



market, therefore there is a parity at all times between 
the values of the products in process of exchange and 
those of the outstanding credit instruments that repre- 
sent them. It is for this reason that any arbitrary en- 
hancement in the nominal values of credit instruments 
will produce a like increase in the prices of products 
and make necessary a readjustment, which after comple- 
tion results only in counting in higher numbers. This is 
inflation and the reverse of the process is deflation. 

standard of In a system of credit exchange there must 
value. b e a standard of value — a common denomi- 

nator of values into which all credit values may be trans- 
lated, thus establishing the ratio of the value measured 
to the unit of the standard of representative value. By 
means of this process all representative values and the 
ratios of products to each other may be established. In 
products, the standard is the unit into which concrete 
substances are divided such as pounds, feet, bushels, etc. 
The enumeration of the number of these units conveys 
only the idea of either weight, length, contents, etc. It 
gives no indication whatever of value. 

Value an The idea of value is abstract. It has neither 

abstract idea, length, breadth, nor thickness. It is the 
measure of the intensity and extent of desire considered 
in its relation to the ability of the individual to satisfy 
want. The current value of anything, with apologies to 
Butler, is just so much as it will bring. In other words, 
current value is a purely relative expression of the ratios 
existing between the thing valued and other things hav- 
ing their ratios similarly expressed. To say that the 
horse is worth one hundred dollars and the cow is worth 
fifty, simply indicates if the exchange is to be fair, that 
two cows must be given for one horse. 



Currency and Bank Credit 203 

Can only have The common understanding necessary to 
a single £ the effective use of credits can only be ob- 

standard. tained by a single standard of value. If two 

or more standards are used it necessitates the translation 
of them into a single standard before exchange can pro- 
ceed. For example, if the Russian uses the rouble stand- 
ard and the American uses the dollar, each must know the 
ratio of the two standards to each other before arriving 
at an agreement. 

standard The standard of value must be as invariable 

must be as t ne contents of the bushel measure or the 

invariable. length of the yard stick. Less than this in- 
troduces confusion and necessarily results in the impair- 
Finctuating ment of the obligations of contracts. To 
standard robs make obligations using a dear standard and 
either debtor discharge by a cheaper or vice versa, results 
or creditor. j n ^ e robbery of either the creditor or 
debtor as the one or the other method is used. 

Diverse The denunciations of the old Jewish law- 

standards givers against the use of diverse measures 

immoral. an( j we jg n t s apply with equal force to the 

employment of any standard of representative values 
that may be capable of being made either cheaper or 
dearer. The use of a variable standard attacks the basic 
principle upon which the representative exchange system 
rests, that is to say, it weakens faith and confidence in 
the exact and equal justice which is the right of all. 

standard The measure of products must convey a mu- 

mustbe tually understood impression of quantity, 

intangible and length or num b er , as a bushel of corn, a 
yard of cloth or a dozen apples. When these 
concrete products are exchanged for credit instruments 



204 The Way Out 



which do not indicate weight, length, or numbers but only- 
value, there must of necessity be found a unit or standard 
of this intangible thing, value, which is also itself both 
intangible and invariable. 

Every country that has undertaken to supplement bar- 
ter by means of representative credit exchange has been 
compelled to adopt some arbitrary term to express the 
unit or standard of value. In all cases it is only an ab- 
stract idea, as invariable as a yard stick, and can no more 
preserve a fixed ratio to any product than the yard stick 
can adjust itself to the expansion or contraction of the 
thing measured. 

Value is Value itself is variable. It is ever rising or 

variable. falling. Its static periods, if they exist at 

all, are of exceedingly short duration. The dinner to the 
hungry man is valuable, but this eaten, the next is worth 
considerably less. The more immediate the need, the 
more difficult the satisfaction of it, the higher the value. 

Credit exchange The adoption of a system of representative 
facilitates credit exchange is not intended to lessen 
barter. barter in any degree. On the other hand, it 

facilitates it. The more efficient the system of represent- 
ative credit exchange, the more general will be the actual 
bartering of products themselves. 

The standard of value — this arbitrary idea represent- 
ing the unit of value in credit exchange- — must, like the 
bushel or yard, remain invariable, and its exponents 
show the exchange ratio of the product to which it is ap- 
plied, just as in the case of the measure of products the 
bushel is an invariable quantity while the number of 



Currency and Bank Credit 205 

bushels indicates, when the exchange of products takes 
place, the ratio that the product measured bears to that 
for which it is exchanged. 

The standard This unit or standard of representative 
not flexible. value therefore can have no flexibility. Any 
change in the value of the unit of value is not flexibility 
but an alteration of the standard making it either cheaper 
or dearer. In other words, such change is the adoption of 
a new standard of value and introduces the immoral prac- 
tice of using diverse measures by which one buys in a 
large measure and repays in a smaller or vice versa. 
This is obviously robbery, and is subversive of every prin- 
ciple of fair exchange and destructive of confidence and 
faith, the foundation upon which a system of credit ex- 
change must rest. 

Representative Since credit exchange is effected by means 
credit f representatives of value these must orig- 

exchange. inate f rQm mater i a i values, because they are 

but the shadows of the real substance. They must there- 
fore faithfully represent that for which they stand. A 
dollar of credit exchange, then, must have behind it a dol- 
lar's worth of material value that can be obtained on 
demand by the holder of the instrument of credit ex- 
change. Whether this instrument be a dollar in currency 
or a dollar bank credit, it must be convert- 
Credit iki e on demand into any article that the 
exchange holder may desire to take out of the world's 
convertible mar k e t. A correct system of representative 

on demand , . , , . , x , , , . 

into credit exchange must issue demand obliga- 

products. tions for the amount of value of the products 

put into the market, and liquidate or cancel 

a like amount of credit value when the products are taken 



206 The Way Out 



out of the market. In this way credit exchange automat- 
ically redeems itself. 

Credit It is the most obvious of fallacies that there 

exchange must or can be any particular product, 

^oduTtf m whetner metal or not > that can be designated 
as the article of final redemption of credit 
exchange. Any product that may be bought in the 
market is performing its part in the redemption of repre- 
sentative value and to the extent of its value is cancelling 
these demand obligations. When these credit obligations 
pass through many hands it undeniably makes the oper- 
ation more complex but in no wise alters its character. 
If A buys of B one hundred bushels of potatoes at one 
dollar per bushel, giving him a demand note for this 
amount, and if then B buys of A one hundred bushels of 
wheat at one dollar per bushel, paying A by returning 
him, cancelled, the demand obligation for one hundred 
dollars, the credit obligation is liquidated and the trans- 
action is closed. If this credit obligation passes through 
thousands of hands and A finally redeems it in wheat, 
there is no difference in the principle involved. 

Essential Credit instruments, in the last analysis, are 

features finally redeemed in property, the kind of 

of credit property depending upon the available stock 

for sale and the choice of the holder of the 
credit instrument. The essential features of efficient 
credit exchange instruments are that they each must be 
for a definite number of the units of the standard of 
value, and that these demands upon the available stock 
of things must be promptly honored when and wherever 
offered in payment for a corresponding amount of value. 
Failure to meet either of these requirements is fatal to 
the successful operation of the system. 



Currency and Bank Credit 207 

Credit instru- Purely representative credit instruments, 
ments. f or the purpose of this discussion, may be 

divided into two classes, viz. : government currency and 
bank credits. In the former are included all paper token 
money, whether treasury notes or national bank notes, 
and such metallic token money as may be exchangeable 
at a given value merely because it bears the government 

stamp. From it gold is excluded since it is 
Gold not supposed to carry a value as a metal equal to 

exchange ^ na ^ wn i cn & commands as a stamped coin. 

Exchange of gold for products, loans or pay- 
ment of obligation is simply barter. Gold certificates are 
likewise excluded since they, properly considered, are 
nothing more nor less than warehouse receipts for gold 
deposited with the government of the United States. 

All currency The different kinds of currency, passing 
practically from hand to hand without indorsement, are 
government essentially government currency, since all of 
it owes its general acceptance to the actual 
or supposed government responsibility for its redemp- 
tion. There appears to be neither reason nor justifica- 
tion for the variety of this currency. The government 
alone should issue it, and it all should be of the same kind 
differing only in denominational value. 

Bank credits. Bank credits include both the demand obli- 
gations of banks and deposits subject to check — i. e., 
bankers' checks against balances in other banks and de- 
. positors' checks against balances in bank. Bank credits 
furnish the greater part of representative credit ex- 
change. It is necessarily more restricted in circulation 
than government currency but is much greater in 
amount. It is peculiarly suited for transactions of record 
and for transmission of larger amounts of credit. 



208 The Way Out 



A sound Since representative credit exchange is the 

currency reflection of property put in the market or 

sold, and is liquidated when property is 
taken out of the market or bought for use or consumption, 
it necessarily follows that a sound system of credit ex- 
change must function in accord with these controlling 
facts. 

Arbitrary Since the credit exchange existing at any 

alteration m given time should always equal in value the 
vo ume o balances arising from the unliquidated obli- 

changes the gations incurred in the interchange of prop- 
standard. er ty an d products in process of exchange, it 
follows that any arbitrary alteration of this 
proportion will of necessity result in the change of the 
value of the standard itself. If the sum of the products 
sold equals one hundred dollars in value and credit value 
of that amount is issued for it, and if then this currency 
is arbitrarily raised to two hundred dollars, the standard 
will be changed and the adjustment made by means of a 
rise in the nominal value of the products to equal the 
amount of inflation injected into the representative 
credits. The rise in prices that invariably accompanies 
inflation of credits is due to this cause. 

Change of If everything rose in periods of inflation or 

standard f e \\ j n those of deflation in the same propor- 

a ers ra 10 ^ on ^ ^ wou j ( j no £ occasion much serious loss, 
debts and since it would amount to nothing more than 

products. counting in higher or lower numbers. Un- 

fortunately, neither inflation nor deflation 
affects all things uniformly. Fixed amounts either of 
debts or incomes remain nominally the same whatever 
may be the change in the value of the standard, hence any 
arbitrary change either by inflation or deflation is a 



Currency and Bank Credit 



209 



change in the ratio between products and property on the 
one side, and debts and incomes on the other. The cred- 
itors and receivers of fixed incomes lose as the standard 
is cheapened, and the debtors as the standard is made 
dearer. 



If left alone, bank credits naturally conform 
to the law that representative credits shall 
maintain an invariable relation or ratio to 
the value of the unliquidated amounts paid 
for the things in process of exchange. These 
demands upon the market are in a direct 
way analogous to warehouse receipts which 

entitle the holders to claim at will the stored articles. 

Upon delivery of the property the warehouse receipt is 

surrendered and cancelled. 



Bank credits 
normally 
conform 
automatically 
to represent- 
ative credit 
principles. 



Credit In the case of bank credits the thing stored 

exchange j s va j ue instead of property, and the holder 

representatives n demand j s entitled to receive from the 

demands for ■ , , , , , , „ , . ,., . 

stored value market the exact value of his credit in any 
kind of property or product that may be 
found for sale. When all of these outstanding credits 
have been redeemed in products and property the ex- 
change account stands balanced. 



Representative It will be noted that the scarcity or pleni- 
credit £ U( j e f products under this system will 

exc ange neither increase nor decrease the sum of the 

affect prices representative credit values extant. These 
values are created as the goods are sold, and 
liquidated as they are bought. Under this system price 
changes will still occur, but they will be due to the effects 
of supply and demand, the exercise of monopoly control, 
etc., and not to arbitrary change in the standard of value. 



210 The Way Out 



Fiat credit However arbitrary may be the method of 
instruments regulating the amount of currency and bank 
a ect prices. credit, such for instance as issuing currency 
against government bonds, or metal reserves, or the cre- 
ating of fiat bank credits against gold reserves, there will 
be a ratio between the sum of these credits and the bal- 
ance of representative credits resulting from selling 
goods into the market and buying goods out of the 
market, and this ratio regulates the effect that currency 
and bank credits have upon prices. To illustrate : if the 
currency and bank credits consisting only of the unliqui- 
dated balances arising out of the sales and purchases of 
property and products made a certain volume of repre- 
sentative credit exchange, the price level, let us say, 
would be 100. Now if the volume should be arbitrarily 
doubled the price level would rise to 200. This rise in 
prices would occur regardless of the character of the ar- 
bitrary credit exchange created. Notes issued against 
gold deposited in the treasury or notes without cover 
issued to pay governmental expenses, if the amount of the 
issues were equal would have identically the same effect 
on the price level. 

The value When credits are restricted to a smaller 

of the unit sum t nan wou i(j normally result from goods 
c ange y an( j p r0 p er ^y so \a the scale of prices lowers 
issues. until an equilibrium is established between 

things sold and the credits available to buy 
them, and likewise when the sum of credits is nominally 
increased, the prices of things rise until an equilibrium 
is established. Any change of ratio at once raises or 
lowers the value of the unit or standard of values and 
thereby impairs the obligations of all preexisting con- 
tracts, since debts, fixed charges and established incomes 
remain nominally the same whether the value of the unit 



Currency and Bank Credit 211 

of value is lowered or raised. In the former case the 
creditor is robbed, while in the latter the debtor is doubly 
robbed, in that the debtor's gains are percentages of low 
values while the creditor's gains are percentages of high 
value. 

No arbitrary No arbitrary method of creating currency 
system can be an( j b an k credits can possibly preserve an 
stable. uniform ratio to that which should obtain 

between things in process of exchange and the credits rep- 
resenting them, since it would be impossible for any arbi- 
trary system to function with one which automatically 
rises and falls as the tide of products flows into the 
market and recedes out of it. 

Arbitrary It is the effort to do arbitrarily that which 

interference should be left free to follow a natural and 
productive e course that involves the financial sys- 

of robbery. " . ... . . . 

terns of civilized countries in so much con- 
fusion, and incidentally furnishes the few more astute 
enlarged opportunities to prey upon the less informed 
masses. So refined is this method of conscienceless rob- 
bery that the most of those despoiled are in no degree 
conscious of either the source or the method of their de- 
privation. They know that something is wrong and place 
the responsibility upon almost anything from providence 
down to the corner grocer. The most of them remain 
entirely ignorant of the deft hands that pilfer their 
pockets by the very simple method of expanding or con- 
tracting credit, thereby changing the measure of value. 

The only The only possible standard of value of a sys- 

proper £ em f representative credit exchange, as al- 

s an ar o ready explained, is an abstract idea — an ar- 
bitrary designation that forms a common 
term or common denominator into which all values may 



212 The Way Out 



enter and permit their ratios to each other to be ex- 
pressed. It is obvious, too, that no single product can be 
used as this standard. 

The standard This intangible, arbitrary term called dol- 
does not j ar ^ f ranc> mark, pound, sterling, rouble, or 

in uence what you will, expresses the present market 

value of the product to which it is applied, 
but in no wise makes, or even influences, value any more 
than the bushel measure increases or decreases the 
amount of wheat. The dollar registers the sum of value 
as it exists, and the bushel measure registers the amount 
of wheat. 

Gold cannot be Values are created by demand and supply 
a standard m a f ree m arket, or by the same as manipu- 
o va ue. lated in a controlled market. It has already 

been noted that gold, used as a medium of exchange, is 
not representative exchange at all but simply barter. 
Contrary to the general opinion, gold is not and cannot 
be a standard of value in a system of representative 
credit exchange. The fact that so many countries have 
exercised monopoly power to put an arbitrary price on 
gold does not qualify it as a standard. If the exercise of 
this power went no further than to decree that so many 
grains of gold should equal the value of the representative 
unit, it would have no effect other than to compel those 
who desired gold for use to pay a monopoly price for it. 
The price of other products would not be affected. But 
when this gold is controlled by monopolists and used as 
the basis for the issue of representative credit instru- 
ments, it becomes apparent that such a system confers 
upon its manipulators the power to expand or contract 
the credit instruments either of currency credits or bank 
credits or both, at will. 



Currency and Bank Credit 213 

The power to In other words, this power to expand or con- 
expand or tract credits is the power to change the 
contract credits measure f va ] ue an( j YG fo either debtor or 

is the power ,., ,, ,. , . , , 

to rob creditor, as the monopolistic manipulators 

of gold may choose. Under such a system, 
when there arises the need to ship large quantities of gold 
out of one country into another, it is possible that a se- 
rious interference with the orderly functioning of the 
credit exchange systems of both nations may result, 
through the creation of a stringency in one and a state 
of redundancy in the other. This change of credit status 
is brought about by a contraction of the base of the credit 
issue in the one and a broadening of it in the other. 

Shipment of Under a proper system, based upon the bona 
gold should fife cre( jits resulting from products sold in 
ave no e ect ^ mar k e t, the shipment of gold would have 
exchange no more significance than the shipment of a 

like amount in value of wheat or any other 
product. It is a source of infinite wonder that civilized 
people of supposed intelligence should have permitted the 
present credit system with its illegitimate use and abuse 
of gold to continue so long in effect. 

Gold as a basis The use of gold as a basis of currency places 
of currency a j n ^he hands of the dominating financial in- 
source o terests the power to increase or decrease the 

volume of credits at will, and thus cause 
prices to rise or fall as it may best suit their purposes. 
The manipulators of credit by these means may sell when 
they have made the scale of prices as high as they choose, 
and buy back when they have made it as low as they care 
or dare to make it. The exercise of such arbitrary power, 
dominated as it will be under the present system by sel- 



214 The Way Out 



fish incentive, must bring want, destitution, bankruptcy, 
idleness, starvation and suicide to the many, and untold 
riches to the few. 

Immorality of It is the power to change the measure, to use 
the gold basis, diverse measure, to buy in the large meas- 
ure and to repay in the small. It is contrary to every 
moral principle and is the meanest, most despicable, as 
well as the most insidious method of pilfering the goods 
and chattels of the ignorant, and therefore helpless, who 
have thus far shown little capacity to discover and place 
the responsibility for their wrongs. The shame of it is 
that the imposition upon the world of the so-called gold 
standard is done in the name of honest, sound money ! 

Abuse of power America is now (1921) passing through a 
and its effects, terrible example of the abuse of power to in- 
flate and deflate credit. It is more striking because it 
was blunderingly managed. Had it been effected in a 
more scientific or evolutionary way, the robbery might 
have been productive of even more spoils, yet it would not 
have been so keenly felt, in that the loss would have been 
more gradual and, being extended over a longer time, 
would have given the victims an opportunity to surren- 
der the booty on the installment plan. While this slower 
but none the less sure method might, and there is little 
doubt would, have entailed less privation and suffering, 
it would have been robbery all the same. 

The change of the measure of value whether by a sov- 
ereign state, an agency created by it, or an individual is 
an unholy, unwarranted thing, a heinous sin 

vaiw^ in the sight of God ' which should be for " 
standard a bidden under severe penalties. The sin of 

heinous sin. the highwayman who holds up his victim 

and by physical force despoils him, or that 

of the bold, bad pirate who seizes the cargo and scuttles 



Currency and Bank Credit 215 



the unarmed merchantman, is as white as wool compared 
to that of the financial manipulator who changes the 
value of the standard for the purpose of exacting a larger 
value in settlement than the measure represented when 
the obligation was made. This language— to those who 
have not correctly analyzed the principles involved — may 
seem intemperate, but certainly not so to those who have 
acquired an understanding of the thing itself. 

The characterization in the present case should be con- 
strued as descriptive of effects rather than as denuncia- 
tory of persons, since the purpose is to expose the un- 
soundness of the present currency and representative 
credit system, rather than to call into question the moral 
derelictions of those who operate it. *, 

Reference has been made to matters of administration, 
and some of the opportunities for abuse which the un- 
sound system affords have been pointed out, but these 
may be regarded as incidental digressions. The main 
contention is that the acceptance of the doc- 
No material i Y [ ne ^^ a material substance, gold, or 

substance cs,xi 

. , , any other concrete thing, ever was or ever 

be a standard J ° 7 

of value. can b e a standard of value in a representa- 

tive credit system is an egregious error — 
and further that the making of gold or any other ma- 
terial substance the basis for the issue of currency or 
credit exchange renders the system arbitrary and subject 
to dangerous manipulation both from ignorance and de- 
sign. Only the omniscient and the omnipotent could op- 
erate such a system with the nicety of readjustment that 
would be required to prevent the evil of constant change 
of the value of the standard itself. 



216 The Way Out 



The When these basic truths are fully under- 

Federal stood, and we remember that this great 

Reserve country, the United States of America, has 

committed itself to a system of currency and 
bank credit that places in the hands of seven men the 
power arbitrarily to call representative credit into exist- 
ence to an extent limited only by its relations to a gold 
reserve, it becomes apparent that the last word in cur- 
rency and credit reform has not yet been spoken. 

Credit As has already been pointed out, credit is 

currency representative; it is merely the shadow of 

purely ^ e rea l substance. The credit instruments 

^representative. . . , ., . , ,'■,, , , 

arise as material things go into the market 

and are sold, and these instruments are automatically 
liquidated as the material products are bought for stor- 
age and use. This being true, what possible relation could 
there be between a fixed quantity of gold stored in a 
treasury vault and the ever changing volume of trade 
in the market? The mere statement of the proposition 
makes its absurdity obvious. 

Objections The use of gold or any other material sub- 
to the stance as a basis for the issue of representa- 
goid basis. j.. ye cre( jit exchange is for several reasons 
objectional. The amount of gold available at any given 
time for this purpose bears no proper relation to the 
amount of credit exchange needed to represent the sum 
of the values of products and property in process of ex- 
change. These sums are constantly increasing or de- 
creasing as the exchange of products is proceeding 
rapidly or slowly, hence, instead of the greater activity of 
the market furnishing, as it should do, more credit ex- 



Currency and Bank Credit 217 

change, under any arbitrary system credit exchange will 
be relatively more restricted and conditions more strin- 
gent as the exchanges take place more readily, and just 
the reverse when trading is slow. Expressed differently, 
there will be relatively the less supply of representative 
credit exchange when most needed, and the greater abun- 
dance when there is least use for it. 

Credit It should be well understood that represent- 

exchange ative credit exchange is not capital but only 

not capital. ^ re p resen tative of capital, and the de- 
mand for credit for purely exchange purposes, if a proper 
system of credit exchange exists, could never be greater 
than the supply, for if the instruments of credit ex- 
changes are called into existence by the putting of prop- 
erty and products into the market and selling them, and 
if buying things out of the market cancels the same 
amount of value as had been created, it is self-evident 
that there could never exist a shortage of credit instru- 
ments. 



A shortage If at any time there is a deficiency of supply 
of currency f credit exchange, this proves incontestably 
evi ence o ^^ ^ S y S t em un( j er which it is issued and 
stem manipulated is defective and arbitrary. 

Under a proper system by which property 
and products sold would call into existence automatically 
their own representative credit values, financial strin- 
gency could only occur when the demand for actual cap- 
ital, i. e., property and products, began to exceed the ex- 
isting supply of them. When this condition occurs the 
need is not for more credit exchange, but either for en- 
larged production or a slacking down in the use of capital. 



218 The Way Out 



Differentiation A clear understanding of the function of 
between representative credit exchange requires that 

credit ex- there must be a distinct differentiation be- 

change and the . „ ,. - , . , , 

acquisition tween the function of exchange instruments 
of capital. as suc h an d the matter of acquisition of cap- 
ital. The former is only a method of facili- 
tating barter ; the latter, so far as credit instruments are 
involved, is the process of collecting them and effecting 
their liquidation by means of the purchase of actual 
property or products. 

Acquiring As already explained, when capital, i. e., 
capital property and products, is taken out of the 

decreases market it automatically cancels or liqui- 

exchange dates the currency and bank credits repre- 

senting it. If it is reproductively used, it 
again gives rise to representative credit instruments 
when the products resulting from the use of the invested 
capital begin to be sold in the market. Whenever capital 
is employed in a way that requires a long time to effect 
the return of products to the market, such use causes a 
contraction of the basis of representative credit exchange 
and if carried far enough will produce serious reaction. 



"Flexible" It is at this point that the temptation arises 
currency to provide some method of making the cur- 

bad currency. rency an( j cre dit exchange system "flexible." 
Since it is impossible to make something out of nothing, 
all efforts by such methods to increase the sum of avail- 
able capital will not only fail of their purpose but produce 
many harmful effects in other directions, chief among 
which will be the arbitrary change in the standard of 
value. The stringency occasioned by the excessive use of 
capital for things of non-utility, or for the production of 
useful things in advance of the need for them, is the eco- 



Currency and Bank Credit 219 

nomic danger signal which to the wise would mean either 
that greater production of capital must be had, or its use 
curtailed, or perhaps both. 

The function The function of banks is to gather the rep- 
of banks. resentative credits of the country, and those 

in excess of the immediate need of the holders constitute 
a loan fund which the banks can loan on time to those who 
desire to use it immediately. The borrowers proceed to 
liquidate the representative credit exchange through in- 
vestment in actual capital. The original holders through 
the banks have therefore in effect loaned the capital 
bought by the borrowers, accepting therefor time obliga- 
tions which take the transactions out of the realm of 
credit exchange. The banks in making these loans, per- 
form a highly useful service, since surplus capital is 
thereby kept in constant use, which of itself makes pos- 
sible a higher degree of social and economic efficiency. 

Only loans it is clear, however, that the legitimate field 
of bona fide f ^ e banks is confined to the loan of bona 
cap . 1 a fide capital, and that any method of predi- 

cating their loans upon a reserve of any kind 
which might enable them to loan sums of credit, in excess 
of the actual surplus of capital available for loaning pur- 
poses, is a barefaced fraud upon the public. It is "kiting" 
credit — a practice that should become as disreputable as 
it is immoral. No manner of juggling with either cur- 
rency or bank credits can add to or subtract from the 
existing stock of products available for loaning purposes. 
The principal effect of such reprehensible practices is to 
cause values to be counted in higher or lower figures, as 
inflation or deflation of credits is practiced. 



220 The Way Out 



Gold The employment of gold as a reserve is en- 

reserves tirely unnecessary in a well conceived rep- 

resentative credit exchange system. It is 
not needed as a liquidating agent, since representative 
credits automatically liquidate themselves. It furnishes 
no reasonable basis for measuring the volume of repre- 
sentative exchange necessary at any particular time for 
the convenient conduct of affairs. It never has and never 
can serve as a measure of credit value. Why, then, should 
governments give to it a monopoly value and make of it 
the regulator of the volume of credit exchange, especially 
when such use places in the hands of its manipulators 
the power to make the country prosperous or destitute as 
may seem desirable to them? 

Excessive gold Such use of gold involves a tremendous eco- 
production nomic loss, in that billions of gold are pro- 
an economic duced i n excess of the legitimate need for it. 

W£LST6 

If this unwarranted use of it were discon- 
tinued and it had to find its proper value in a free market 
like other products, there would still be a demand for it 
for its proper uses in the arts, for jewelry, etc., but it is 
safe to say that its value would fall one-half. 

Danger At the present time the United States of 

of gold America seems to have become the dumping 

accumulation. ground of the world f or goldj and gince it ig 

being sold at a monopoly price entirely out of proportion 
to its commodity value under a more correct monetary 
and credit system, there is grave doubt whether the con- 
tinuation of the policy is wise or even expedient. When, 
too, it is further considered that practically all European 
nations are dangerously near bankruptcy and must of ne- 
cessity have at some time a general reorganization and 
readjustment of their currency and credit systems, it be- 



Currency and Bank Credit 221 

comes imperative that this country should examine with 
great care the fundamentals of the subject now under dis- 
cussion. Should these nations find that gold is not neces- 
sary to the functioning of a well ordered currency and 
credit system and discontinue its use for this purpose, 
what would be the economic and financial effects upon a 
nation whose treasury was running over with gold bought 
at double its commodity value for the uses to which it 
would be confined under the new plan? 

Arepresenta- The thought is strongly suggestive of an 
tive currency analogy that would exist between such a 
system nee s government and the speculator who had 
filled his warehouses with a commodity 
which, because of a more restricted use, had lost half its 
value. That a system of currency and bank credits that 
will not require the use of any gold can be organized and 
successfully operated does not admit of serious doubt. 
Not only can it be made to function, but it will prove far 
superior to the present system. 

TJps and downs Much of the rise and fall of business activity 
of business j s ^ ue fo the faulty operation of our ex- 
*f t ! v J ty t resu * change system. When the heavy losses inci- 
system. dent ^° ^ ne irregular production which a de- 

fective exchange system superinduces are 
counted, it will be obvious that defects which impose so 
great an economic handicap should be eliminated as early 
as possible. 

Under a well organized system of production and ex- 
change everything should move along with continuity and 
steadiness, except so far as fluctuations might be oc- 
casioned by weather conditions affecting crop yields, by 
wars, political upheavals, and the errors in judgment 
causing unbalanced production. Under the more correct 



222 The Way Out 



system such a thing as a general depression or a great 
business boom would be practically impossible, and so- 
ciety would be saved the sufferings of the first and the 
improvident wastes of the latter. 

Abetter The organization of a better currency and 

system bank credit system does not appear to pre- 

p ' sent insuperable obstacles. Much of the ma- 

chinery for it is already in use. The Federal Reserve 
banks, with the addition of a Central Bank in lieu of the 
Federal Reserve Board, would furnish the necessary 
framework. This Central Bank should control the system 
and should alone be charged with the duty of issuing cur- 
rency, both paper and coin, restricting the use of the 
latter to what might be needed for small change only. 

Paper currency should be issued only 

e issue o against the surrender of corresponding 

against bank amounts of bank credit, and a reserve of 

credit. credits equal in amount to the amount of 

currency issued and outstanding should be 
set aside for the sole purpose of redeeming the currency 
when returned. In other words, the Central Bank should 
on demand convert bank credits into currency or cur- 
rency into bank credits, as the one or the other form was 
desired. 

Not possible The Central Bank, carrying a reserve of 
to inflate the credit equal to the amount of the outstand- 
oan und. -^ currenC y an( j reconverting the currency 

into bank credit as it was returned, could never increase 
or decrease the available loan fund by its currency issues 
or reconversions of it. Currency under this plan would 
only be issued for use as currency, and when it was no 
longer needed in this form, it would be reconverted into 
bank credit. 



Currency and Bank Credit 223 

Change of The exchange of bank credit for currency, 

bank credit an( j v j ce versaj j s constantly done at present. 

into currency Qne haymg a credit at bank hag but to haye 

his check cashed to accomplish it, or to de- 
posit the currency and receive a like amount of bank 
credit. This, however, only applies under the present 
system to such currency as may already have been issued, 
while under the proposed plan any amount of new cur- 
rency could be issued upon the surrender of a like amount 
of bank credit. In other words, confirmed bank credits 
would be exchangeable for currency at par — or currency 
for bank credits on the same terms. Under this plan no 
gold would be necessary. The dollar, whether repre- 
sented by currency or bank credit, would be redeemed in 
whatever the holder desired to buy that was for sale. If 
he desired gold, he could buy it as a commodity, and it is 
safe to say, if the proposed system were put into opera- 
tion, that the holder's dollar would buy more gold than it 
will now buy under the present system. 

Government The Central Bank with its branches should 
ownership of ^e owne( j absolutely and operated exclu- 
e en ra sively by the United States government, 
system ^ ne i ssue °^ currency and the control of 

bank credit are susceptible of such recon- 
dite manipulation to accomplish sinister purposes that 
they cannot with any degree of public safety be left under 
private initiative, dominated as it will always be by sel- 
fish incentive. These social conveniences — public ser- 
vices of the highest order — if democratic institutions are 
to live, should never be made the sources of private gain. 
It would be quite as safe for the government to surrender 
its judicial, legislative, or executive function in favor of 
private parties that would assume the public power and 
make it a vehicle of private profit. He is indeed an opti- 



224 The Way Out 



mist who would be willing to entrust such tremendous 
power to any private persons under the most powerful in- 
centives to abuse it. God did not make any man who is 
sufficiently wise and good to hold the power that this 
would give him over his fellow creatures. However much 
opposed the public may be to the extension of public func- 
tion, due regard for the safety of society, for the life of 
free institutions and for the hope of social progress will 
compel it as a matter of stern necessity to apply the prin- 
ciple to this extent at least. 

Limiting the In the present stage of social development it 
sphere of the would perhaps be advisable to confine the 
sys em. operations of the Central Bank and its 

branches to dealings with the government and the banks. 
The system should be the repository of all government 
funds, bank reserves and surplus credits, and should loan 
them under proper restrictions at the points of greatest 
need. The rate charged for loans should be only so much 
as would be necessary to cover the bank's expenses, in- 
cluding its losses. The system should have no power, di- 
rect or indirect, to influence rates to be 
egu ation o charged by its patron banks. The interest 
rates rate, or at least the maximum, that banks 

could charge for loans should be established 
by act of Congress. 

The difficulty The proposed system presents, of itself, no 
of change. insuperable obstacle, but the greater diffi- 

culty and the more perplexing problem is to find an easy, 
evolutionary way of displacing the present system, with- 
out causing the harmful effects that would attend sup- 
planting an existing system by even a better one that 
functions on a different principle. 



Currency and Bank Credit 225 

Adjustment The present volume of currency and bank 
of a new credits has regulated and established the 

system to yalue of the standard — the dollar — and this 

standard * s true, however arbitrary may have been 

of value. the method. If, for instance, credit had been 

inflated one hundred per cent above what it 
would have been under the correct method, it follows that 
the introduction of a proper system would produce a 
change in the value of the standard of value that would 
alter the ratio of debts to property and products in the 
proportion that the currency would be deflated. This 
change, if credits had been inflated, as above stated, 
would double debts or reduce the value of products by 
half, as one might choose to express it. If either infla- 
tion or deflation takes place, the debtor or creditor is 
robbed, the standard of value is changed, and the obliga- 
tions of all contracts expressed in the previous standard 
are seriously impaired. 

Necessary Theoretically, justice would require that all 

to maintain debts, when the new system was established, 
p J ese ^ t . t V0 ume should be augmented or reduced as the new 
scale or standard of value was cheaper or 
dearer than that of the system superceded, but this would 
likely prove to be impracticable. If the sudden change of 
value of the standard, with all the attendant and far- 
reaching evils, is to be avoided, it would be indispensable 
that the same volume of credit should be maintained, ex- 
cept so far as it might be changed gradually through the 
operation of economic law. 

Character The present currency, National Bank notes, 

of present greenbacks, and Federal Reserve notes, are 

predicated for the greater part, not on ac- 
tual credits but upon debt. Gold certificates are only 



15 



226 The Way Out 



warehouse receipts, and when the gold monopoly is once 
broken neither these nor the stamped gold dollars will 
circulate at par with currency based on actual credits. 
The gold, too, held as reserves against Federal Reserve 
notes, will decline in value, leaving a loss that must be 
sustained by someone. 

liquidation if these currency obligations, which in the 
of currency. ultimate analysis are nothing more nor less 
than government debts, are to be redeemed or liquidated, 
it could only be done either by taxing the public or selling 
bonds. Either method would produce the same result in 
that it would take from the stock of bank and currency 
credits an amount equal to the amount liquidated and 
cancelled. In other words, the available supply of nom- 
inal credit would be decreased to the extent of the amount 
of currency retired, and the standard of value would be 
made dearer to that extent. In this case, creditors would 
be the beneficiaries of the change. 

Gradual Sufficient evidence exists to warrant the 

increase of statement that inflation of the currency in- 
creased steadily from the beginning of this 
century to the time of putting the Federal Reserve system 
into operation. Since that time, the inflation of both cur- 
rency and bank credits has proceeded by leaps and 
bounds. The constant increase in the per 
Rapid inflation ca pjta circulation and the rising tide of 
^/ r prices from 1900 to the time of the intro- 

Reserve duction of the Federal Reserve system have 

system. popularly been supposed to be due to the 

larger production of gold, but the more reas- 
onable hypothesis seems to be that the larger production 
superinduced by greater intelligence, more scientific 
methods, and the use of improved machinery, necessi- 
tated larger use of currency, and as the method of ere- 



Currency and Bank Credit 227 

ating it was arbitrary and not representative of value 
going into the market, every dollar issued changed the 
ratio between the sum of representative credits and the 
products represented. It is of course understood that, 
there being no method for transforming bona fide rep- 
resentative credits into currency, all of it was available 
in the form of bank credit. The natural result of this 
constant, arbitrary increase of the sum of representative 
credit caused prices of all products and property to in- 
crease in nominal value. This constant enhancement of 
the price level must have resulted under such circum- 
stances, whether the currency consisted of gold, or simply 
of paper money issued against bonds or without security. 
It was the arbitrary increase of the amount of the circu- 
lating medium that caused the change in the value of the 
standard. The enactment of the Federal Reserve law in- 
creased the opportunity for changing the price level, vest- 
ing, as it did, the control of the credit system in a board 
of seven, which of necessity must function in accord with 
the interests owning the system. This law in effect makes 
a private monopoly of the credit system and bestows upon 
it power to inflate or deflate the volume of representative 
currency and bank credit at will. Not only has it the 
power to change bank credit into currency and vice versa, 
but it likewise has the power to create arbitrary credit 
based on private debt. 

A suggested A practicable solution of the problem would 
solution. probably be found in the following: Or- 

ganize a government owned and operated Central Bank, 
which would alone issue currency. Have two distinct 

forms of paper money. Call the one "Treas- 
currency. ur y n °tes" and the other "Credit notes." 

Issue "Treasury notes" equal in amount to 
all the outstanding currency obligations except sub- 



228 The Way Out 



sidiary coins and silver dollars actually needed in making 
exchanges. 

Issij e Call in and retire, by issuing "Treasury 

"Treasury notes" for them, the National Bank notes, 
n °A s „ or greenbacks, gold and silver certificates and 

outstanding rl : n « , r™ . * 

fl , nn , OT ,^ Federal Reserve notes. This amount of 

C LiX X cXXis V • 

Treasury notes should remain fixed. Under 
no circumstances should the volume of this kind of cur- 
rency be either increased or decreased. 

Cancel bonds The government should take over and cancel 
held against ^he b on d s ne icl against National Bank notes, 
paying the National Banks whatever excess 
there might be above the amount of the bank notes se- 
cured by them. 

Disposition of The holders of gold and silver certificates 
gold and silver snou icl have the option of taking either the 
certificates. "Treasury notes" or the coin called for in 
the notes held, but in the latter case no further liability 
should attach to the government. 

Discontinue The government should stop the coinage of 
gold and silver ^q^ s ii ver an( j gold and divorce itself en- 
coinage. tirely from responsibility for the market 

value of them. 

The Central Bank, having issued "Treasury notes" for 
the outstanding Federal Reserve notes, would take over 
the gold reserve of the system and such bank obligations 
as covered the outstanding note issues. 

Sale of gold When the gold and debts due against Fed- 

to be applied era j Reserve notes were liquidated, what- 

? ay f ent ever was realized from these sources should 

be applied to the payment of the public debt 

represented by bonds. This plan would impose upon the 



Currency and Bank Credit 229 

government the duty of taking over the most of the gold 
supply in the country. This gold should be gradually 
sold and the proceeds used to effect the reduction of the 
government's bonded indebtedness. 

It is obvious that there would be a heavy loss involved 
in disposing of this gold, but it seems fairer that the 
public should bear it than that it should fall upon a part 
of the people who were no more responsible than the 
others for the mistaken public policy that caused the loss. 

The suggested It risks little to say that this solution would 

system better -foe productive of far better results than the 

asan more radical way of redeeming the out- 

expedient. ,. , . ,. ,, 

standing currency and inaugurating the 

more correct system, since the more radical method, 

though correct in itself, would necessitate a tremendous 

change in the price level and establish an entirely new 

ratio between products and property on the one side and 

debts on the other. 

Stabilization The controlling purpose in the foregoing ar- 
theend rangement is to stabilize values and pre- 

desired. serve the existing ratio between products, 

property, and debts. So far no provision has been made 
for the increase of currency to take care of the expanding 
need of an enlarged commerce. The amount of currency 
heretofore used is made static and, like the laws of the 
Medes and Persians, should never change. 

The issue of The Central Bank, or the agency for issuing 
"Credit notes." currency, should upon demand and upon the 
delivery of an equal amount of bank credit to it by the 
bank taking out such currency, issue "Credit notes" in 
any amount and denomination desired. In other words, 
any bank could get these "Credit notes" for whatever 
amount the Central Bank or its branches might owe it. 



230 The Way Out 



Neither The Central Bank must, however, require 

increase ^hat ^he issuing of new currency be con- 

oTiolTfund ducted on a strictly cash basis. That is to 
say, that the loan fund would neither be in- 
creased nor diminished by the issue of new currency, 
since it only amounts to a change of form of credit. The 
bank taking out the new currency, or returning it to the 
Central Bank for reconversion into bank credit, would 
have identically the same amount of liquid or loanable 
funds in either case. 

Central Bank The Central Bank should carry at all times 
reserves. a reserV e equal in amount to the amount of 

"Credit notes" outstanding, and this reserve should only 
be used for the reconversion of "Credit notes" into bank 
credits when the currency was returned. 

Currency for Under this plan currency would never be 
use as such taken out except for use as such, nor would 
011 y " the change in the volume resulting from the 

issue of it or its reconversion have any effect on the value 
of the standard or the general price level. Both the 
"Treasury notes" and the "Credit notes" should be made 
full legal tender and receivable for all debts, public and 
private. 

Proper Along with this currency system there 

banking should be enacted proper banking laws re~ 

s ' stricting the loaning power of banks to le- 

gitimate loan funds, and requiring that they keep suffi- 
cient reserves deposited with the Central Bank to insure 
the safety of their operations. 

Interest rates The maximum interest rate on deposits and 
regulated by loans should be regulated by Federal stat- 
statute. ute. Such a currency and credit system 

would stabilize prices by making the unit of value invari- 



Currency and Bank Credit 231 

able, and harmonize employers and employees, since a 
variable unit of value is a thing most prolific of labor 
disturbance, introducing as it must, the question of re- 
adjustment of wages to the purchasing power of the un- 
stable standard of value. It would enable both the debtor 
and the creditor to feel secure that the debt would be 
liquidated in the same measure that obtained when it 
was made. 

Currency and it is not intended to say that there would be 
credit system no change in prices, but if there were 
w * J 10 . changes they would not be occasioned by the 

currency and credit system. Price changes 
would and should occur, but they would result from the 
operation of economic law. 

Economic law If y on account of crop failure, inefficiency of 
the true price labor, or whatever cause, the supply of a 
regu ator. given product should be reduced, the price 

of it would rise to induce greater production. On the 
other hand, if production were in excess of the need, the 
price would fall to compel producers to lessen production 
to the extent necessary to bring the particular products 
into balance with the demand for it. These changes are 
salutary and necessary to an orderly, well balanced pro- 
duction and even if they could be stopped, it would be un- 
wise to do so. 

Principle, It will be observed that the proposed plan 

not human largely eliminates human discretion in 
iscretion matters of credit, whether exercised by an 

individual or a board, and relies entirely 
upon correct principles for the regulation of credit oper- 
ations. The nation under this plan may make all the 
bank credit it can and convert as much of it as it chooses 
into currency, but it cannot lend a dollar that it does not 



232 The Way Out 



possess. It cannot perpetrate a fraud upon the public by 
calling into existence false credit as the present system 
does, thereby calling down upon the nation the train of 
evils that invariably follows such reprehensible practices. 
This new system may, and no doubt will, be considered 
radical, but it rests upon sound principles and will stand 
the test whenever tried. It can only prove to be perma- 
nently harmful to speculators and gamblers, who are the 
beneficiaries of unstable conditions and whose rewards 
are most liberal when the nation is most unfortunate. 
Honest businesses of all classes have nothing to fear from 
it. 

Redemption of It will probably be suggested that no ade- 
currency. quate provision has been made for the re- 

demption of the currency herein proposed. This matter 
of redemption is usually the bete noire of immature stu- 
dents of currency. It is frankly admitted that provision 
for redemption was not made because it is not the inten- 
tion that it should be redeemed. In the case of the 
"Treasury notes" the government assumes liability for 
them simply to provide the public instruments of ex- 
change that may be used in a way that will stabilize the 
present standard of value, and the fact that these instru- 
ments can be used to pay taxes and all other kinds of 
debts will insure their circulation at par. If they become 
redundant as currency, they can be deposited with the 
central banking system and become bank credit or be re- 
issued against a surrender of a similar amount of bank 
credit. 

stabilization In short, the purpose of keeping this sum of 
the reason for arbitrary inflation in the currency and 
y e aimng credit system is to stabilize it and avoid the 

terrible injustice and suffering that must 
result if deflation takes place. 



Currency and Bank Credit 233 

"Credit notes" The "Credit notes" issued against bank 
will be credit will automatically be cancelled when 

automatically ^ey are returned and are reconverted into 
bank credit, and the latter will be liquidated 
or "finally" redeemed when it is exchanged for property 
or products taken out of the market. 

Under the plan proposed it is entirely probable that the 
"Treasury notes" will furnish all the actual currency re- 
quired. The provision for "Credit notes" is made to take 
care of needs that might arise under exceptional circum- 
stances. 

The extent of The amount of representative credit instru- 
mflation. ments now in existence is at present made 

up of all the currency outstanding plus the bank credits. 
Since the currency has been arbitrarily issued without 
relation to or diminution of bank credits, it follows that 
the credit system is inflated to the extent of the total cur- 
rency issued. 

The object in converting the various kinds of arbitrary 
currency into one kind is to stabilize it and thus keep the 
credit system inflated to the same extent at all times as 
it is now. To effect this purpose it will be necessary for 
the Central Bank and its branches to set up a reserve 
against all "Treasury notes" as they come 
eservesto -^ ^ g p OSsess j on# Otherwise the deposit 

further °^ ^ s currency, creating as it will a corre- 

lation, sponding amount of bank credit, would 

make it possible for the Central Bank to loan 
the currency itself and thereby increase the amount of in- 
flation to the extent of such loan. To illustrate : a deposit 
of a thousand dollar "Treasury note" would make a bank 
credit of similar amount, and if the note itself were 
loaned there would be credit instruments representing 
double the amount of the deposit in existence. If, how- 



234 The Way Out 



ever, the Central Bank system, upon the acceptance of 
this deposit, must increase its reserve to the amount of 
the "Treasury note," its loan fund would only be enlarged 
to the extent of the amount credited to the depositor. In 
effect, the "Treasury notes" in the Central Bank would 
not be a loan fund at all, but only a collateral security 
against the bank credit given the depositor. In this case 
this currency could only get out of the Central Bank upon 
the surrender of a corresponding amount of bank credit. 

Reserve against In the case of "Credit notes," the reserves 
"Credit notes." wou i(j operate in exactly the opposite direc- 
tion. The reserve should be set up against the amount of 
currency sent out instead of the amount taken in as in the 
case of "Treasury notes." The capacity of the Central 
Bank to loan bank credit should be diminished to the ex- 
tent that it issued credit notes and vice versa. While it 
is not intended to deal here with banking problems, it 

may be said that the handling of currency 
banks ^v banks, unless properly restricted by laws 

compelling them to set aside reserves to pre- 
vent the practice, gives them great opportunity to inflate 
the loan fund, especially during periods of great business 
activity. Knowledge of this fact suggests the inquiry 
and invites investigation as to the extent of the practice, 
the effect of it upon the stability of prices, and how far it 
is responsible for the intermittent rise and fall of busi- 
ness activity. 

Probable There is reason to believe that unwarranted 

bank inflation of the loan fund by banks has been 

inflation. carried to a much greater extent than is 

generally supposed, and that the practice is by no means 
of recent origin, which in turn suggests the query how 
much of the nominal increase in national wealth during 



Currency and Bank Credit 235 

the last half century is an increase of genuine capital and 
how much of it is mere inflation. 

Booms and Booms and business depressions are inf al- 

depressions Hble symptoms of a defective currency and 

indicate credit system, and while these recur we may 

„„™^™o„,i know of a certainty that there is need for 

currency and J 

credit system, further analytical study and constructive 
readjustment of it. These phenomena will 
continue to appear, most likely in cycles, until a system 
is devised that will make the standard of value in- 
variable. 

Arbitrary One thing at least is clearly established, that 

increase or an y arbitrary increase or decrease of the 
decrease of nominal amount of either currency, bank 
standard^ 6 credits, or the surplus of capital available 
for loans, has the direct effect of changing 
the purchasing power of the standard of value, seriously 
impairing the operation of the credit exchange system, 
superinducing a train of economic and financial disturb- 
ances that might be avoided by the substitution of a 
system more in accord with sound economic principles 
and with that most emphatic moral injunction — thou 
shalt not steal. 

Correct system This better system would deny to all the op- 
admits neither portunity to inflate or deflate the currency 
of inflation an( j frank credits, and would reduce legiti- 

nor deflation. , , . . , , . , , , 

mate banking to gathering the surplus 
credits of the country and lending what the banks actu- 
ally had, less reasonable reserves, to the end that this 
surplus might be employed all the time in the beneficial 
process of reproduction of capital. 



236 The Way Out 



Post war The greater part of the unfortunate condi- 

troubies due tions following the world war is directly due 
to u . ure o ^ Q ^ ] 3rea i C( j own f the currency and credit 

credit svstem 

exchange systems of all countries. The fact 
that this general breakdown has occurred is sufficient to 
raise the question of the soundness of the system itself 
and to stimulate investigation as to the causes of its fail- 
ure to function efficiently. 

It is well within bounds to say that the losses of the 
world since the war, on account of currency and exchange 
credit difficulties, are second only to those actually re- 
sulting during and incident to the war itself. The inter- 
ference with production and distribution occasioned by 
the credit exchange situation caused losses that cannot be 
exactly determined, but even superficial examination will 
show that they were enormous. 

It cannot be too emphatically expressed, or too 
strongly impressed, that there can be but one basis for 
the issue of representative credit exchange, that this basis 
is the values of property and products sold into the 
market, and that this credit exchange, whether it is in the 
form of currency or bank credit, must be the evidence of 
title to these values. 

If the evil effects of an unsound currency and credit 
exchange system are to be avoided, it is of primary im- 
portance to ascertain the things that cannot serve as a 
basis for currency or bank credit. In this class of non- 
permissible things should be included : 

1st. — Warehouse receipts for stored products. It 
matters not what the product may be or who the ware- 
houseman is. It is immaterial so far as the effect on 
credit exchange is concerned whether the product be gold 
in the government treasury vaults or cotton in some 
warehouse, the issue of currency or bank credit against 



Currency and Bank Credit 237 

either has the same evil effect. It changes the value of 
the standard and destroys its stability. 

Intrinsic value It should be remembered, too, that the in- 
does not trinsic value of the stored product does not 

qualify a pro- affect itg suitabi i ity as a basis for credit 

duct as a basis , ._, , , . . , 

for currency, exchange. The product m such case is 
merely collateral, and even though it may be 
always worth the value called for by the currency issued 
against it, it is unfit for a basis of currency issue, since 
it is not the solvency of the issue but the fact of issue that 
affects the currency system adversely, by destroying its 
equilibrium, which changes the ratio between products 
and debts. 

Effect upon The issue of currency or bank credit against 
prices. stored products in its effect upon prices is 

equivalent to creating an unlimited demand. This arbi- 
trary issue with its false demand causes prices to rise 
out of all proportion to what they would be under the 
operation of legitimate demand. The effect of such issues 
is identical with that of all other forms of inflation of 
the circulating medium. 

Debt public 2d. — Debt in all forms, whether that of a 
or private not government or of some organization operat- 
a proper j n g un( j er ^ s authority, can never form a 

proper basis for a currency or bank credit 
issue. 

Currency and At the risk of repetition, it can be said that 
bank credit currency and bank credit, two forms of the 
a trust . same thing, form a trust obligation of the 

most sacred character and, commercially 
speaking, it is strictly in accord with the truth to say 
that damnation follows inevitably any abuse of this trust. 



238 The Way Out 



The terrible ordeal through which the people of the 
United States have been passing during the past two 
years, and the still more destructive experience of Euro- 
pean countries during the same period are directly at- 
tributable to abuses of the trust obligation involved in 
their currency and exchange credit systems. 

Sound currency Genuine, sound currency or bank credit rep- 
andbank resents title to the value of products and 

credit. property sold into the market and is there- 

fore as much an evidence of title as is a deed to a piece of 
real estate. The holder of this evidence of title to value 
had necessarily to surrender for it property or products 
of equal value before coming into possession of it. There 
cannot, therefore, be any legitimate issue of currency or 
bank credit until and after property or products have 
been sold, which acts give rise to representative value. 

Government Governments are not productive and there- 
currency f ore cannot issue currency except as a debt 
a debt. — a demand obligation or promise to pay. 
This in no sense is currency and has no proper relation 
to a sound currency system based on representative 
credit. 

Government The effect of government issues of so-called 
currency paper money — which is not money at all but 

not money. on jy a p U kii c <jebt — is to destroy the invari- 
ability of the standard of value. It impairs the obliga- 
tions of contracts, and in effect makes necessary that the 
debtor class rob the creditor class while the volume of the 
issue is increasing, and likewise compels the creditor class 
to rob the debtor class, doubly, when the volume of the 
issue is being decreased. 



Currency and Bank Credit 239 

Currency 3d. — The issue of currency against the de- 

agamst deposit posit of bonds or any other form of collat- 
of bonds,etc, era j p^jg or private, is unsound, for the 

unsound. , , . • <i t • /• 

reasons already given in the discussion of 
currency based on stored products. 

The use of Collateral security is entirely proper as se- 

coliaterai. curity for loans of currency and bank 

credits that have been legitimately created, but it has no 
proper relation to the process of bringing such credits 
into being. 

Currency a If governments were faithful to the solemn 
trust not trust obligation involved in a sound cur- 

n ® cess ®_ n y rency and bank credit system, their unbal- 
unbaianced anced budgets would of course affect ad- 
budgets, versely their financial obligations but would 
have no effect upon the circulating medium. 
Their credit, if they were improvident, would be impaired 
and this would be reflected in the lower price of their 
bonds and other obligations, but if the exchange system 
was kept separate and distinct, as it should be, from 
public debt, the currency and bank credits would continue 
to pass at par — however involved the government's finan- 
cial affairs might be. 

To illustrate the point in the preceding paragraph: 
If A's outgo was greater than his income, his credit would 
become impaired, but if this same party was at the same 
time a trustee, and his trust accounts were in solvent 
condition, his credit as a trustee would remain high. In 
such a case, A's individual paper would be below par 
while his trust obligations would at the same time be un- 
impaired. 



240 The Way Out 



Government Governments are best fitted to provide the 
issues of organization for furnishing currency, but 

i uTctkn a tmst only as a trustee f or the p ublic - When the y 

abuse this trust by undertaking to issue 
their own demand obligations to be used as currency to 
provide for their own needs for capital, this act destroys 
the hope of a proper currency system and insidiously 
foists upon the public a spurious currency, which is noth- 
ing more nor less than a non-interest-bearing govern- 
ment debt. Such a practice has never worked out satis- 
factorily and never will, because it grossly violates the 
fundamentals of sound currency. 

European and Russia, Germany, Austria, and other Euro- 
American pean nations are held up to ridicule on ac- 
sys ems count of their false currency systems, but 
that of the United States of America is only 
better in degree. It employs the same basic principle as 
they do, with this difference : They issue government ob- 
ligations to be used as currency for the purpose of getting 
for government use the capital that should be gotten 
either by taxation or legitimate borrowing, while the 
United States issues currency predicated on private debt, 
guaranteed by the government, not for government pur- 
pose but in order to furnish banks this manipulated and 
false credit to loan. In this way they are enabled to loan 
what does not exist. In other words, the banks under this 
system "kite" credit — another name for plain unvar- 
nished inflation. 



CHAPTER XII. 

NEXT STEPS. 

Better The controlling purpose of the preceding 

understanding chapters has been to stimulate thought on 

e o jec . ^ su ]yj ec t s discussed and to promote a 

better understanding of the principles that govern them. 

Suggested The present aim is to suggest such public 

application policies as may be in consonance with these 
of principles. p r i nc ipi e s, to the end that social progress 
may be secured in an orderly, evolutionary way that will 
obviate those harsher revolutionary changes and destruc- 
tive reactions which always follow renewal of progressive 
effort too long delayed. 

Past attitude The first step in the right direction should 
agamst De an effort to change entirely the attitude 

cooperation. Q ^ ^ e law-making power toward coopera- 
tion. In the march upward from anarchy, social laxity, 
and inefficiency to closer cooperation, the law has been 
written upon the assumption that cooperation was a 
crime in itself. The Sherman anti-trust act, enacted 
thirty years ago, made it a crime to make any combina- 
tion that was capable of being used to restrain trade. 

Two classes The law recognizes two classes of crimes, 
of crimes. those acts which are wrong in themselves — 

malum in se, and those which are right in themselves but 
criminal only because the constitution or statute makes 
them so — malum prohibitum. The anti-trust law and 
acts of similar character, in so far as they prohibit acts 
right in themselves, evidently belong to the latter class. 

241 



16 



242 The Way Out 



The law-making body might with equal reason and on 
the same principle enact a statute prohibiting the use of 
knives because forsooth some demented creature might 
cut his throat with one of them. 

Law against The best evidence of the futility and stark 
evolution not unwisdom of such legislation is the fact that 

in the period from the passage of the pro- 
hibitory law referred to above to the present time, more 
combination has been effected than in any similar period 
of previous history, and this, too, in the teeth of laws for- 
bidding it under heavy penalties ! The law and the courts 
were powerless to prevent that which the evolution made 
mandatory. 

It is unthinkable that this could have occurred if com- 
bination had been wrong in itself. What seems to have 
taken place was that the legislative bodies, in obedience 
to an uninformed public opinion, sought to stay the march 

of progress, and imposed upon the courts an 

ourts given impossible task, with the result that the law 

task remained practically a dead letter, and the 

attempts to enforce it became the subject of 
jest and ridicule. 

Abuses, not Instead of prohibiting combination and co- 
sound operation, the policy of the law should be to 

TT/lT encourage them. These forces are the most 

legislated powerful agents of social uplift. Without 

against. them civilization would be impossible. The 

recognition of a right principle in no wise 
commits one to the abuses of it, and the law might well 
concern itself with measures for the prevention of the lat- 
ter. Combinations are simply instruments which may be 
used either for proper or improper purposes. If the law- 
makers would confine themselves to devising methods of 



Next Steps 243 



discovering and prohibiting the latter, it goes without 
saying that their time would be fully employed and the 
results of their labors would be far more effective. The 
strength of the strong is not denied him because, perforce, 
he might use it to despoil his weaker neighbor. Action 
against him is deferred until he has actually done, or 
shown unmistakable signs of doing, something that would 
prove injurious to others. The combination is but an ag- 
gregation of individuals, and the same policy that applies 
to the one should apply to the other. 

Unwise laws The law against combination furnishes a 
£ lve rather striking example of the fact that 

laws or acts predicated upon an unsound 
results. . . . , 

premise sometimes produce quite unex- 
pected results. The object of this law was to prevent the 
enlargements of the units of production and distribution, 
ostensibly to forestall the abuses against the public that 
such concentration of power in private hands would make 
possible, but the actual force behind this restrictive legis- 
lation was more likely the efforts of the smaller units to 
prevent the destructive competition that they feared from 
larger operation. 

Combination Regardless of the law greater combination 
has come in j ias come> frequently merging many small 
spi e ° units into a single unit. The large unit has 

now acquired, or can acquire without fur- 
ther combination of units, all the capital that it requires, 
and possessing all the advantages that attach to large op- 
eration, it has the smaller units at a serious economic dis- 
advantage, and may now invoke against them this same 
law to prevent them from combining to protect them- 
selves against their more powerful competitor. A rather 
good example of being hoist with one's own petard. The 



244 The Way Out 



most powerful combination now has least to fear from 
this policy of repression. It is now the smaller units, 
desiring as a defensive measure to get together, who will 
most likely feel the stinging blows of the lash which they 
so gladly prepared for the backs of their more ambitious 
rivals. 

laws for Better results may be expected from laws 

social tj^ are m consonance with right principles 

expression. an( ^ ^hat, on the corrective side, concern 
themselves only with the detection and punishment of 
acts which are wrong in themselves. Constructively, 
laws should provide methods for proper social expression, 
i. e., there should be provided a lawful way by which any 
right thing may be done. 

Adapting The constructive statesman in adapting leg- 

laws to a islation to present situations, must con- 

stantly take into consideration the existing 
need and the present state of economic and social evolu- 
tion. The ideal should be retained, but that is the shadow 
line in the dim distance which, like the horizon, recedes 
as it is approached. The paramount purpose should be 
the continuous development of cooperation and the sub- 
stitution of public initiative for private whenever the 
latter has reached the point of economic development 
where its inherent weaknesses and evils overbalance the 
good that it can accomplish as an imperfect agency for 
the extension of the cooperative principle. 

institutions In this connection, it should be remembered 
born, not ^ na ^ institutions, like poets, are born, not 

made, and that ready-made models do not as 
a rule fit the environment in which they are intended to 
function. This being true, both practicability and prac- 



Next Steps 245 



ticality become matters of vital importance in all propo- 
sitions involving radical departure from the established 
order. 

While these complications do not furnish any valid 
reason for the undue retardation of sane progression, 
they do, nevertheless, suggest proper enquiry and pains- 
taking effort to adjust the new order to the old so as to 
avoid all unnecessary jar in the social service system and 
any hiatus in the service itself. 

Social The work of social development may be di- 

deveiopment vided as it relates to matters of local, state, 
local state, national, and international concern. Coop- 

national and . „ „ , . 

international eration, if successful, must serve a common 
interest, hence it will develop least in 
sparsely settled communities. 

Rural In rural districts, the best field for such en- 

districts, deavor will likely be found in cooperative 

action to promote education, health work, civic better- 
ment, production, cooperative buying and selling, and 
recreation. The schoolhouse should be made the social 
centre from which the effects of all of these activities 
should radiate. 

Mere literacy Mere literacy, only a means to an end, 
a means to should cease to be regarded as an end in 
anend - itself. The effort should be to develop 

thought, and if possible, increase the power to think, so 
that all things that affect life may receive that intelligent 
consideration so vitally important to individual and social 
growth. 

A democratic The school system should be democratically 
school system, organized so that responsibility and leader- 
ship in matters of local concern would devolve upon the 



246 The Way Out 



people most directly interested. The effect of this policy 
instead of conflicting with or enervating general manage- 
ment would be most helpful in making it doubly efficient 
by furnishing a local organization for carrying cooper- 
ative policies from whatever source into effect. 

Develop in Each community, whether rural or urban, 
accord with should undertake to develop along the lines 
loca mteres s. ^ -^ QWn p ecu ij ar interests. The general 
principles may remain the same, but the methods of ap- 
plication and the subjects considered and stressed should 
be adapted to the needs of the locality. It would be a 
waste of time to teach agriculture to industrial workers 
or vice versa. 

The service Cities with greater density of population 
principle in an( j ^ ne more closely knit organization that 
it compels are well prepared for an exten- 
sive application of the service principle. It is surprising 
that this has not already taken place to a greater extent. 
Just why a community should burden itself with graft, 
political corruption, boss government and exploitation, 
when by a little organization, and the use of its own 
wealth and credit for its own protection and benefit it 
could get rid of such undesirable and demoralizing in- 
fluences, is an enigma which suggests searching enquiry 
as to the intellectual and moral capabilities of its citizen- 
ship. 

Public There appears to be no reason in the services 

ownership and themselves that would prevent the public 
opera ion. ownership and operation of a city's public 

service institutions. The successful operation of heat, 
light, water, gas plants, and transportation systems in- 
volves nothing more than sufficient capital, proper organ- 



Next Steps 247 



ization and efficient management, all of which are within 
the reach of the average city. Under these circum- 
stances, the failure of the city to provide such public ser- 
vice, making it necessary to burden the people with the 
tribute that private monopoly must impose, is a reflection 
upon the community itself. 

The city The general spread of the idea of better 

manager municipal organization, as indicated by the 

many adoptions of the plan for the adminis- 
tration of the affairs of cities by city managers, is a most 
hopeful indication of civic awakening and progress. The 
concentration of power and responsibility that this plan 
connotes makes possible the employment of initiative and 
an attainment of efficiency that will go far in promoting 
the growth of public opinion favorable to more extensive 
application of the service principle. The world waits for 
some agency to do its work and it goes to the hands that 
will do it best. Once demonstrate that a city can do these 
things for itself better and cheaper than private agencies 
can do them for it and the latter will be forced from the 
field. 

Possibilities For reasons previously given, the separate 
of state action states have only a limited opportunity to 
limited. engage in socialistic enterprise. In case the 

state undertakes it, capitalism presents a solid front in 
opposition, and if the state should be dependent upon pri- 
vate parties for any considerable amount of capital it will 
likely experience great difficulty in supplying its needs. 
Having the power, special privilege will not hesitate to 
coerce the state to the extent necessary to defeat its pur- 
pose to limit exploitation. 



248 The Way Out 



Capitalism The attitude of capitalism toward states' 
and rights is best illustrated by the course pur- 

states ng ts. guec | jjy ^ e railroads in the matter of rate 

regulation. In 1906 when the Hepburn rate bill was 
under discussion, the roads were ardent advocates of local 
government and states' rights, presumably because under 
the proposed plan of Federal regulation they anticipated 
that the Interstate Commerce Commission would wield 
the rod of correction with more force than state commis- 
sions had done or could do. Some of their spokesmen 
went so far as to denounce Federal regulation as "com- 
mercial lynch-law," but a new light broke upon them 
after the law was passed. 

Railroads The roads were agreeably surprised to find 

surprised. ^hat ft required less time and energy to un- 

dertake to establish the soundness and probity of their 
propositions before one central commission having juris- 
diction coextensive with the country, than it had formerly 
done to accomplish the same result before forty-eight 
separate commissions whose jurisdictions were limited to 
their respective states. 

Change of Presto, their views changed overnight and 

base - they became as earnest in their advocacy of 

enlarging the power of the central authority as they had 
before been in their opposition to it. As to states' rights, 
so far as the roads cared, they might go hang. 

Rapid concen- Evidence is not lacking that the roads have 
tration of made substantial progress in getting public 

power. policy brought into line with their revised 

program of centrallization, since the Interstate Com- 
merc Commission is not only naming interstate rates but 
is commanding the state commissions to bring intrastate 
rates into proper relation to them. 



Next Steps 249 



The courts have sustained the power of the Interstate 
Commerce Commission to compel the state commissions 
to obey its orders as to intrastate rates, and by this de- 
cision have scrapped the idea of a federal government of 
limited powers made up of an association of sovereign 
states. This is only another of the many instances that 
sustain the view that economic necessity or power domi- 
nates political power, however fundamental the matter 
may be. Economic necessity brings the political struc- 
ture into accord with its demands, written constitutions 
to the contrary notwithstanding. 

Economic The large business units under private 

power initiative are potentially greater than the 

grea er an separate states, and therefore state action 
in this direction would most likely re- 
sult in failure. 

state The most promising prospect for the exten- 

communism. s j on f s tate function lies in the direction of 
communism. Public education and public health, pro- 
vision and care for the dependent classes, the detention 
and care of prisoners, the building and upkeep of public 
roads, and other things of like character, are all purely 
communistic, that is to say, they require that the contri- 
bution shall be according to strength and the distribution 
according to need. These things cannot function under 
the profit principle and therefore the state meets no or- 
ganized opposition in this field, except as to the amount 
of the tax levied to support these activities. 

Health work It may be said, while on the subject, that 
and schools education and health work are only differ- 
go oge er. en ^ p ar £ s f ^ e same thing. They should be 
more closely related than they have been in the past. The 



250 The Way Out 



failure to realize the vital importance of giving more at- 
tention to the health of school children is responsible for 
the waste of enormous amounts upon those who are in- 
capacitated by remediable defects and diseases. 

Support for The support of the schools and health work 
schools and should come largely from the state and the 
eat , state an g enera j government, since they alone have 
the power to reach the wealth in all sections 
and distribute it uniformly where the need exists. There 
is of course no objection to localities supplementing these 
contributions, but only after the state and nation have 
done all that they should do. 

Increase of As cooperation progresses, the constant ten- 
government dency is to increase the functions of all the 
divisions of government. The local govern- 
ment continues to introduce new activities and also to de- 
velop those previously started, so that they, in many 
cases, become a part of the state's work; and the state 
pursuing the same course, matters of purely intrastate 
concern finally become interstate and come under the 
general government. This change of relation takes place 
whether the operation is under private or public initia- 
tive. 

Growth and The small business serves the locality, but 
extension of jf ft continues to grow it will spread first 
business. oyer a( jj ace nt localities, then the state, and 

finally become national and even international in its rela- 
tions. For this reason the greater part of the task of 
making economic readjustments will naturally become 
the duty of the national government, and it is in this 
forum that the larger causes will finally be determined. 



Next Steps 251 



Conservative There are perhaps even now many things 
progression. under private initiative which are suffi- 
ciently developed to warrant putting them under the ser- 
vice system, but conservatively progressive leadership 
will no doubt conclude that a few things undertaken and 
done well would in the long run prove a better policy than 
to invite the confusion that might result from trying to 
do too much at once. 

Fields for Whenever the general government decides 

nationalization. j- introduce the service system, it, like the 
fruit grower, should gather the ripest first. The rail- 
roads, banking and currency, telegraph and telephone 
systems, and the coal industry present inviting fields for 
experimentation in nationalization. There are many 
reasons, economic, financial, and political, why these 
things should be brought under the service principle as 
early as possible. 

One system The different railroads should be parts of 
of railroads. one S y S t e m so that all unnecessary duplica- 
tion could be eliminated. There is no way by which 
maximum efficiency can be attained while thousands are 
engaged in doing for the separate roads what a much 
smaller number could do better for a single system com- 
prising the entire mileage of the country. If there were 
only one unified system, freight would be sent by the 
shortest route or at least by that which involved the low- 
est cost, millions would be saved by the elimination of 
the unnecessary appendages that are now required to get 
business for the separate lines and to keep accounts of 
the numberless adjustments that division of management 
and interest makes necessary. It is hardly an exagger- 
ation to say that, if the salaries of the official and legal 



252 The Way Out 



staffs that could be easily dispensed with under govern- 
ment ownership were deducted from rates, an appreciable 
difference would be made in them. 

Efficient Under this plan the rolling stock would 

operation. work with greater efficiency, which is equiv- 

alent to saying that less investment would have to be 

made to furnish it. The greatest saving 
CQ viT,a. c would likely be on the financial side. The 

change would at once put the banking in- 
terests out of the railroad business. There is abundant 
evidence available to prove that the major part of the 
railroad shortcomings are found here, vide New York, 
New Haven and Hartford, and many other cases, where 
banking interests have wrecked the properties upon 
which they got their clutches. They use these instru- 
ments of public service for the purpose of collecting 
tribute from the highest to the lowest. It might be 
thought that the stockholders are the beneficiaries of this 
imposition but the indications are to the contrary. The 
prices of railroad stocks, and the amount of dividends 
paid, are strongly indicative that the financial jugglers 
see to it that the most of what is gotten from the public 
is safely anchored before it ever gets to the stockholder. 
The proverbial poor widow and orphan, who have so often 
been apostrophized by eloquent pleaders for private own- 
ership, must now count themselves fortunate if they get 
a small dividend, since in many cases they get nothing. 

The public may lose money by having to pay exorbitant 
rates, the stockholders may lose by the road's failure to 
have sufficient net earnings to pay dividends, but it is 
safe to say that the banking interests which control the 
roads, and which of all are most insistent upon keeping 
them in their hands, are sufficiently satisfied with their 
returns to induce them to continue the present arrange- 



Next Steps 253 



merit. On the surface it appears that they have made 
national beggars of the railroads, ever asserting the 
claim that they are on the verge of starvation. 

Railroad's tale Dressed in the conventional tatters of the 
of woe. alms-seeker, unkempt and unwashed, the 

railroads are constantly paraded before an always sym- 
pathetic and sometimes simple public to tell their oft re- 
peated tale of woe and ask that they be saved from de- 
struction. Strangely enough their appeal is generally ef- 
fective. Whether the managers of the show use the re- 
ceipts to pay larger profits on purchases from the enter- 
prises which they control, or to pay the price of financial 
assistance, is not material. The pertinent fact seems to 
be that the public and the ordinary stockholder have little 
consideration when the final settlement is made. 

Banking The fact that railroads are indispensable, 

control no ^at ^e present state of social development 

onger nee e cou \^ no t b e sustained if they ceased to func- 

m 

transportation. ^ on ^ a ^y efficiently, furnishes no valid 
reason why they should be left under the 
control of the banking interests, which apparently are 
using them as a cat's paw to drag chestnuts out of the 
fire for their own delectation and profit. Agencies of 
any kind have an excuse for existence only so long as they 
are the most efficient that society can command for the 
particular work assigned to them. There may have been 
a period in the life of railroads when the bankers, how- 
ever expensive and wasteful the service, were quite neces- 
sary to the development of the transportation system, but 
it is no longer true. There does not now remain a vestige 
of reason why the people of the United States should per- 
mit the transportation business, affecting as it does every 
interest from the highest to the lowest, to be transacted 



254 The Way Out 



on the basis of a financially embarrassed concern that 
finds itself compelled to submit to loan-shark exactions. 
Every consideration of sound economics, enlightened 
public policy, and a proper regard for public safety, de- 
mands that the transportation system of the country shall 
be taken out of the hands of private banking interests and 
made independent of them. 

No entangling It cannot be too strongly emphasized that, if 
alliances public ownership and operation are adopted, 

between ^ c h an g e should be clear cut, that is to say, 

pu ic an ^ a t there should be no entangling alliances 

interest. w ^ n private interests, since the latter on 

principle must of necessity be an antagonis- 
tic element that would continually work to the detriment 
of public ownership and operation. 

Government ownership of the railroads, resulting as it 
would likely do, in the adoption of a single classification 
of freight in place of the three general classifications and 
the various local classifications and exceptions now in 
use, would put rates upon a mileage basis. Each locality 
would then stand upon its own economic foundation and 
its development would be normal. 

Policy of Much of the movement of population from 

congestion. ^he rU ral districts to large centres is directly 
attributable to the transportation policy adopted by the 
railroads, which by giving preferential treatment in ser- 
vice and rates to selected localities has concentrated man- 
ufacture and commerce in these favored spots. 

Effects of If the government owned the roads and 

equal treated all sections and localities alike, giv- 

opportum ym • ^ Q eac ^ ^ gerv j ce £ w hich it is justly 
transportation. 7... . ,, . .. , , . . , " 

entitled, this policy would certainly have a 
most pronounced and far-reaching effect upon our civili- 



Next Steps 255 



zation. Congestion would disappear and the growth of 
small towns and villages would be greatly promoted. This 
policy would also have a profound effect upon the general 
marketing system of the country and upon the habits 
and customs of the people. 

Smaller units Under such a plan, the growth of the larger 
of production units of manufacture and commerce would 
wou resu t. - n mos ^ cases fo e retarded and in others ar- 
rested, and many smaller operations would find it pos- 
sible to meet successfully the competition of the larger 
aggregations that have been promoted by the preferential 
policy now in vogue. 

Would regulate The introduction of this system would do 
trusts. more to regulate the so-called trusts than all 

the restrictive laws that ever have been passed. The 
effect would be a general slowing down of the movement 
toward centralization that otherwise will in a short time 
drive society to a nationalization of industry or to a rev- 
olution, perhaps both. The present transportation policy 
has unduly stimulated the concentration of industry and 
commerce, and in these cases has superinduced an un- 
healthy growth. In business as in other forms of growth, 
the more normal development, even if slower, is prefer- 
able. Public policy should encourage cooperation, but 
only to the extent of giving it an opportunity to develop in 
ways that involve no contravention of the rights and im- 
munities of others. It should be given a square deal — 
nothing more, nothing less. 

Nationalization Nationalization of railroads is considered 
of railroads ^y man y as a radical measure, but taken in 
reactionary. connection with the effects of this policy 
upon the industry and commerce of the country, it is 



256 The Way Out 



ultra conservative, not to say actually reactionary. It 
would make impossible the realization of the dream of 
the extreme radical, who impatiently awaits the national- 
ization of practically everything. 

Credit and The framers of the United States' Constitu- 
currency. ^j on apparently recognized the imperative 

necessity of reserving to the Federal government the 
power to "coin money, regulate the value thereof, and of 
foreign coin and fix the standard of weights and meas- 
ures." They understood the evil effects that inevitably 
follow the use of a variable standard and therefore gave 
the power to Congress alone to fix it, both in the matter of 
weights and measures. It does not appear that they con- 
templated that the Federal government should issue any 
paper currency, except as an exercise of its power to bor- 
row money on the credit of the United States. It is quite 
plain that they had no adequate comprehension of a 
purely representative credit system and the credit cur- 
rency that it requires. 

Power of It is true, however, that they, in vesting the 

Congress power in Congress to fix the standard of 

weights and measures, adopted a principle 

currency ' ■«■ ■«- * 

that fully authorizes any action that Con- 
gress may take to effect the purpose. If the creation by 
the Federal government of a representative exchange 
system, involving the issue of paper currency, is a neces- 
sary part of the exercise of its power to fix the standard 
of the measure of value, it has, under Chief Justice Mar- 
shall's principle of interpretation, the unquestionable 
power to do so. It does not appear that the Federal gov- 
ernment has power to issue currency for any other pur- 
poses than the two stated above, and since its issue of it to 
borrow money on the credit of the United States makes 



Next Steps 257 



it impossible to fix a stable standard of credit exchange 
value, it is morally, at least, restricted to the single pur- 
pose of issuing it for representative credit exchange. 

No power to If Congress has power to borrow and to 
lend public issue currency as evidence of debt, it goes 
ere 1 or without saying that this must be done for 

governmental use. Therefore there appears 
to be no constitutional authority for such practice when it 
is for private use, as is now done under the Federal Re- 
serve act. Vesting power in Congress to borrow by no 
means carries with it by implication or otherwise the 
authority to lend, more especially when the government 
has no interest in the use to which the loan is to be put. 

It is a source of astonishment that there should still 
exist such a widespread idea that a government has but to 
put its printing presses to work to create value, and that 
it can shovel out all the capital that may be required to 
satisfy both the needs and the wants of its population. 

How long will it be before the public de- 

overnmen velops common sense enough to know that a 

something out government, like an individual, cannot make 

of nothing. something out of nothing, and that its 

source of acquisition resides in its power of 
taxation, therefore it can have nothing to lend unless it 
first takes it from someone else. 



No proper There is legitimately no sort of relation be- 

reiation tween a proper currency system and public 

etween ^^ These two things should be kept abso- 

system and lutely distinct. If this were done, the cur- 
pubiiedebt. rency of the country would remain stable 
regardless of the condition of the market for 
government securities. In this method of dissociation 



258 The Way Out 



of public debt from currency lies the best hope for the 
rehabilitation of the currency systems of the practically 
bankrupt nations of Europe. 

An It would greatly facilitate international 

international trade if a single standard of value, inter- 
currency national bank credits, and an international 
svstem 

currency were provided. The organization 

of such an international system, according to the prin- 
ciples discussed in the proposition to inaugurate a purely 
representative bank credit and currency system for the 
nation, would present less difficulty than in the latter 
case, because there exists no international system of ex- 
change that would have to be amended or abolished. The 
first step would be the selection of a standard of interna- 
tional value. To illustrate : call the unit of value "unum," 
one tenth of it "decimum," one hundredth of it "centesi- 
mum." This would give a decimal system with "unum" 
as the name of the unit. The ratios of all countries could 
be arranged as follows : 

1 dollar = 1 "unum" 

1 pound sterling =4.8665 "unum" 

1 mark = .238 "unum" 

1 franc = .193 "unum" etc. 

Each country could adopt as the ratio of its local cur- 
rency to that of the international system the same ratio 
that it formerly had under the gold standard system. 
Each nation is familiar with this value and could readily 
adapt itself to the new system. 

All quotations, contracts and sales in international 
trade would be in the denominations of the new system, 
and the adjustment that might be necessary on account of 
deranged local currencies would be a matter for local de- 
termination, but it would not in any way affect inter- 



Next Steps 259 



national transactions. In other words, the international 
standard would furnish an invariable measure of the 
value of the products entering into international trade. 

If, for instance, a Frenchman, German, or English- 
man quoted an American a certain article at so many 
"unums" per pound, yard, or gallon, the latter would not 
concern himself either with the solvency of the particular 
country from which the quotation came or the stability 
of the value of its internal currency. The only things 
that would interest him would be the soundness and sta- 
bility of the international credit and currency system, 
and the value of the international unit translated into 
that of his own country. 

Under such an arrangement all international business 
could be done under a single standard, and credits arising 
under it could be transferred to any part of the world 
where it was in vogue. If, for instance, England bought 
from Russia and Russia in turn bought from Brazil, the 
international credit agency by a transfer of credits to 
Brazil could settle the entire transaction. Such a system 
would not be confined to adjusting trade balances be- 
tween any two countries but would be a clearing house for 
the world's international transactions. 

It is obvious that this system would require the organi- 
zation of banks in every country, or at least that the 
system should have working connections there. 

International The sale of goods in the international 
currency and market would give rise to international 
bank credit. bank cre( jit s wn i c h in turn, if it were found 
useful, could be converted into international currency, 
thus making these two forms of such credit intercon- 
vertible. It would of course be necessary in the case of 
the issue of currency to set up a reserve against it, to 



260 The Way Out 



prevent the inflation that would result from the use of 
both the currency and the bank credit. 

The international banks should keep the bank credit 
and currency department absolutely distinct from their 
regular banking operations, such as discounting time 
drafts, the loaning of surplus credits, etc. Such an insti- 
tution should be jointly guaranteed by the governments 
of the principal trading nations, so as to give the confi- 
dence necessary to make its obligations pass current any- 
where in the civilized world. 

International Once this system were inaugurated, the 
prices. goods entering into international trade 

would soon be quoted in the new standard of value, and 
the rise or fall of the value of the national currencies 
would be of no international concern or effect. In other 
words, if a nation's currency became absolutely worth- 
less, it would not interfere with its citizens exporting 
their goods sold by the international standard and receiv- 
ing international currency in payment for them. It is 
only intended here to make crude suggestion. The de- 
tails can be worked out by financial technicians when the 
matter becomes a practical question. 

The principles involved have already been discussed in 
the chapter on Currency and Bank Credit, but it cannot 
be too strongly emphasized that the present currency 
system is fundamentally unsound in many respects, and 
that the so-called gold standard system should be dis- 
carded at the earliest moment, lest America have the sad 
awakening that comes always to him who overstays his 
market. 

Who believes that the poverty stricken nations of 
Europe, when the time comes for readjusting their cur- 
rency systems, and come it will, will undertake to pur- 
chase sufficient gold to form the basis of their currency 



Next Steps 261 



systems when they can construct infinitely better ones 
without the investment of anything for that purpose? 

Great Britain Great Britain may, and no doubt will do all 
and the gold possible to preserve the gold standard with 
stan ar . ^ g un j us tifi a ble use of gold since sixty to 

seventy per cent of the world's production of gold is with- 
in her empire. Other nations, once they have seen the way 
out, will not likely help her sustain the monopoly price on 
gold that enables her to sell it at perhaps double what it 
would bring in a free market after its use as money had 
been discontinued. 

Creation of This country has already deferred too long 
a Central putting its house in order, and further delay 

will not make the consequences less serious 
when the storm does break upon us. The taking over of 
the Federal Reserve banks by the government and the 
creation of a Central Bank under which they would func- 
tion seem to offer the first steps in the easiest way out of 
the wilderness. The inauguration of the system of cur- 
rency discussed in a previous chapter would insure a 
reasonably safe transition from the one system to the 
other. 

Telephone and Telephone and telegraph facilities should be 
telegraph. a p ar £ f ^he p 0S tal service. The advantages 

of quick and cheap communication are obvious. These 
services are of high educational value. Private monopoly 
has already prepared them for the final absorption by 
the Federal government and the immediate effects of the 
change would hardly be perceptible. It is probable that 
extensions into remote territory would take place more 
rapidly under public initiative than under private. This 
has been true of the postal service. 



262 The Way Out 



Coal The coal industry, for various reasons, 

industry. should be developed to the highest possible 

degree of efficiency. Coal once used cannot be regained. 
It is therefore of highest importance that waste should be 
avoided. The deposits vary so much that no two opera- 
tions are at the same cost, and as a certain amount must 
be had, it necessitates, under production by small units, 
that the basic price shall be made upon the operation 
which costs most. This permits the favorably circum- 
stanced mines to charge more than a fair price in times of 
large demand and to operate during dull periods when 
the more costly operation can no longer get cost for its 
production. This condition makes it desirable that there 
should be a centralized ownership and control of coal, so 
that productive costs could be averaged and the price to 
consumers fixed by the same rule. 

Nationalization Were the coal industry nationalized, a thor- 
ofcoal. ough system of conservation could be put 

into effect that would greatly reduce the wastes and in- 
crease efficiency. Taken in connection with the national- 
ization of railroads, the policy of developing energy at 
the mines, transmitting it by wire, could be carried out, 
thus saving the cost of hauling. The electrifying of the 
lines would not only save the movement of the coal re- 
quired by the roads, but it would distribute power over 
wide areas to be used for all other purposes. The govern- 
ment could establish laboratories, and employ such pro- 
cesses as would bring the production of coal under scien- 
tific methods and thus get out of it all its valuable prop- 
erties. 

American The American people, blessed as perhaps no 

waste. others have ever been with a rich store of 

natural wealth, have not shown themselves capable of 



Next Steps 263 



wisely administering the trust thus imposed upon them. 
The reckless way in which they have wasted the natural 
resources of the country reminds one of the herd finding 
a fine pasture. They proceed without thought of the fu- 
ture to trample under foot and destroy ten times as much 
as they consume, and later starve for lack of food. 

improvident Under the present system of coal produc- 
coal . tion, if the haphazard, happy-go-lucky 

pro uc ion methods may be dignified by the term, the 
consumption, prospect of immediate gain is the control- 
ling factor, and all who can get together the 
necessary equipment, however inefficient and crude, 
launch into the mining business. With no general policy, 
little thought of preparation for efficient conservation, 
the business proceeds to appropriate what it can to-day, 
wasting perhaps far more than it gains and leaving the 
future to take care of itself ! 

When it is considered that coal and transportation, of 
all things are most vital to the existence of civilization, 
it should require little persuasion to induce the public to 
make its position safe in these respects. 

Danger lurks There inhere in these two things the latent 
in mining and possibilities of social destruction. Already 
nspor a ion. « n ^ j Qca j revo i u ti ns in Colorado, West 
Virginia, and elsewhere, the country has been put under 
notice that danger lurks in these things. Suppose at some 
critical period the coal and transportation interests, 
either through the employers or employees, decide to 
coerce the general public, it is entirely in the power of 
these two or three million people to bring the entire popu- 
lation to a condition that is more easily imagined than 
described. When this fact is taken in connection with the 



264 The Way Out 



additional fact that private ownership and operation of 
these basic services have much in them to incite revolu- 
tionary conflict, it becomes increasingly plain that public 
safety demands that the change be made. 

The public The lessons of history do not teach that so- 
lackof ciety has ever possessed the faculty of pre- 

prevision. vision to any marked degree, and it is 

scarcely probable that the immediate future will be much 
different from the past in this respect. It has always 
blundered along from one impossible situation to another 
and made such progress as necessity compelled. It may 
continue to do so, paying the exorbitant price that inat- 
tention, inefficiency, and ignorance always pay for their 
sins of omission and commission. 

The individual After all, the question narrows down to the 
the important individual. Whether considered socially, 
ing * economically, or otherwise, the institutions 

existing at any given time are faithful reflections of the 
people of that time. As the latter rise to higher levels, 
they carry the former up with them, but if they descend 
to lower planes their shadows faithfully follow them. 

Human Manifestly, the pressing need is for human 

development development. The progressive forces of the 
-impor an . na ^ on snou id concentrate their power to de- 
velop both the moral and intellectual ability of the indi- 
vidual, striving at the same time to remove as far as pos- 
sible every barrier that stands in the way. The need is 
for more education and better education — not mere lit- 
eracy, but a development of the power to think and under- 
stand, and, of equal importance, the development of the 



Next Steps 265 



love of right and truth. When these objects have been ac- 
complished there yet remains a still more difficult problem 
to solve. 

The crucial What can be done to increase the capacity of 
problem. ^ e individual, thus enlarging the potential- 

ities of this and succeeding generations? It is proverbial 
that one cannot make a silk purse out of a sow's ear. 
What can be done to increase the production of silk and 
diminish that of sow ears? It has been stated that a mil- 
lion, seven hundfed thousand men drafted for service in 
the great war, when tested as to their intellectual ca- 
pacity, showed an average age of thirteen years! This 
would indicate that in this country there are millions of 
adults who have minds that are not above those of normal 
children from eight to twelve years old ! 

The mass of When one considers this immense horde of 
morons. morons that is an old man of the sea upon 

the back of society, the tardiness of social evolution ceases 
to excite surprise. It is unfortunately true that the lower 
the mental capacity of the individuals, the greater their 
fecundity. Shall this flood of deficients continue to rise 
until it submerges civilization, making impossible the 
higher and better things that might be reasonably antici- 
pated from a development of the race? How much the 
desire of large operators for cheap labor and the lax im- 
migration policy which it caused are responsible for this 
large deficient class is indeterminable, but fruitful en- 
quiry for remedial legislation might be found in this 
quarter. The thought that the deficient class will destroy 
civilization is disturbing, but the possibility should not be 
accepted as established. On the contrary, this danger 
should.be taken as a challenge to the better endowed to do 
their best to remove the danger by controlling and eradi- 



266 The Way Out 



eating the causes, which if left alone, would probably pro- 
duce such deplorable results. The subject 
c a enge - g Q ^ su ffi c j en t importance to merit thorough 
capable investigation and study, after which the 

matter of methods could be more intelli- 
gently considered. Politically, the deficient classes are 
a positive menace, in that they furnish the material with 
which evil propagandists and conscienceless demagogues 
can work mightily and destructively. 

The program outlined, viewed by itself, may appear 
imposing, but when it is contrasted with what might be 
done, its moderation becomes apparent. 

THE END. 



INDEX 



American Merchant Marine discrim- 
inated against, 178. 

Amity to displace enmity, 164. 

Anti-trust law, 241. , 

Aristotle, 132. , 

Banks, the function of, 219; legiti- 
mate field of, 219. 

Bank credits, 207; conform to rep- 
resentative credit principles, 209; 
changed into currency and vice- 
versa, 223; control of by private 
interests unsafe, 223. 

Banking, extension of, 107; banking 
interests dominate business, 106; 
controls railroads, 253. 

Banking laws should be enacted, 230. 

Banking and currency, field for na- 
tionalization, 251. 

Barter, dependent on transportation, 
199, 200; facilitated by credit ex- 
change, 204. 

Business, denned, 100; opposition to 
growth of, 101; beginning in small 
units, 102; dominated by banking 
interests, 106; acts constructively, 
109 ; supported by public, 109, 
118; growth and extension of, 
250; international business could 
be done under a single standard, 
259. 

Bonds, a method of contributing 
capital, 60; held against bank 
notes to be cancelled, 228; payment 
of bonds made by sale of gold and 
liquidation of debts due against 
Federal Reserve notes, 228. 

Borrower, takes primary risk, 82. 

Capital, defined, 59; hire of, 59; 
need for, 60, 63 ; forms of contri- 
bution to, 61 ; moral obligation to 
permit beneficial use of, 63 ; bene- 
fits resulting from use of, 66; pay 
for capital, an exaction, 67 ; re- 
turn on capital stimulates few, de- 
presses many, 79 ; capital and la- 
bor, 90, 126; not an entity, 116; 
pay of capital the controlling con- 
sideration, 117; payment for use 
of, 125; capital and labor monop- 
olies, 144; a cause of contraction 
of the basis of representative credit 
exchange, 218. 

Capitalism, defined, 21; origin of, 60; 
reason for, 61 ; capitalism and co- 
operation contrasted, 61; a meth- 
od only, 62; not necessary, 63; 
lacking moral foundation, 65, 81; 
rests upon profit, 72; entitled to 
live until discovery of better in- 
strument, 81; inethical, 89; nec- 
essarily productive of evil effects, 
90; ever-increasing exaction, 92; 
spreading the base of, 94; ultimate 



effect of, 96; cause of class divi- 
sion, 98; greatest evil of, 98; press 
controlled by, 105; special privi- 
lege, the basic principle of, 111; 
greed the cause of, 118; makes 
necessary a subject class, 134; its 
mania for gain, 143 ; capitalism 
and states' rights, 248. 

Capitalist, defined, 21. 

Central Bank, in lieu of Federal Re- 
serve Board, 222; reserves, 230; 
creation of, 261. 

Central Banking system, limiting the 
sphere of, 224; regulation of in- 
terest rates in, 224; "Credit notes" 
should be issued by, 229; should 
require that loan fund be neither 
increased nor decreased, 230. 

Carnegie, 76. 

Chambers of Commerce,, 103, 150. 

City manager, 247. 

Civilization, thinkers advance agents 
of, 101. 

Class efficiency, dependent upon rec- 
ognition of interdependence, 145. 

Class interests, growth of, 144; ten- 
dency toward Democracy, 145. 

Coal industry, need for development 
of, 262; nationalization of, 262; 
improvident production and con- 
sumption of, 263; private owner- 
ship of coal industry incites revo- 
lution, 263. 

Collateral, the use of, 239. 

Collectivism, 7. 

Combination, against the public, 
125; not wrong in itself, 242; in 
spite of law, 243 ; but an aggrega- 
tion of individuals, 243 ; law 
against, furnishes unexpected re- 
sults, 243. 

Common labor, the burden bearer,. 
131. 

Communication, evolution of, 138. 

Communism, defined, 7 ; growth of, 
8; growth in private business, 
state service, 9 ; eleemosynary in- 
stitutions examples of, 10; love the 
basis of, 11; necessary for devel- 
opment of emotional nature, 23; 
wards of, 47; makes classes, 88; 
promoted by captains of industry, 
171; public education and public 
health State Communism, 249. 

Communistic contribution not always 
a loss, 86. 

Communistic administration, 182. 

Compensation, effect of law of, 22; 
fairly computed, 32; for minerals 
and oils, 36; of workers only a 
part of their production, 122. 

Competition, rise of, 15; reasons for 
permitting, 15; destructive, 15; use 



268 



Index 



of, 16; in cooperation, 18; destruc- 
tive competition now impossible, 
19. 

Congress, its power to issue cur- 
rency, 256. 

Conservation, 64. 

Conservative progression, 251. 

Contracts, of force, 114; under du- 
ress, 114; intention the basis of, 
115; mutual consideration the con- 
trolling factor of, 115; unjust con- 
tracts injurious to both parties, 
116. 

Contractors, controlled by mutual 
consideration, 115. 

Cooperation, inclusive, 8; birth of, 
13; reason for, 14; units of, 15; 
economies of, 17; duty of, 18; 
competition in, 18; class, 19; 
abuses of cooperation temporary, 
19; necessary for efficiency, 23; 
law of, 90; private, 96; mankind 
averse to, 100; the law of associa- 
tion, 100; necessity of labor coop- 
eration, 113; cooperation of work- 
ers, agency for increased efficiency, 
123; developing among farmers, 
132; right of individual initiative 
not antagonistic to cooperation, 
155; for efficiency, 156; coopera- 
tion and individuality not antago- 
nistic, 157; gives opportunity to 
demonstrate prowess, 158; greater 
cooperation raises moral standard, 
160; demands wide experience, 
165; past attitude toward, 241; 
in rural districts, 245. 

Cooperative production, 10; coopera- 
tive distribution, 10; cooperative 
manufacture, 133; individual ini- 
tiative demanded by cooperative 
organization, 123. 

Credit, power to inflate and deflate, 
the power to rob, 213; "kiting" of, 
219; necessity for maintenance of 
present volume of, 225; standard 
of value changed by arbitrary in- 
crease or decrease of, 235. 

Credit exchange, dependent upon 
faith, 201 ; facilitates barter, 204 ; 
convertible on demand into prod- 
ucts, 205; essential features of, 
206; demands for stored value, 
209; prices should not be affected 
by, 209 ; should not be affected by 
gold shipment, 213; not capital, 
217; differentiated from acquisi- 
tion of capital, 218; decreased by 
acquisition of capital, 218. 

Credit currency, purely representa- 
tive, 216. 

Credit instruments, two classes of, 
207. 



"Credit notes," 227; should be issued 
by Central Bank, 229; will be au- 
tomatically cancelled, 233; re- 
serves against, 234. 

Currency, government currency, 207; 
shortage of currency evidence of a 
defective system, 217; "flexible" 
currency, bad currency, 218; 
should be issued only against the 
surrender of corresponding 
amounts of bank credit, 222; 
change of bank credit into currency 
and vice-versa, 223; present cur- 
rency mostly predicated upon debt, 
225; liquidation of currency, 226; 
two kinds suggested, 227; redemp- 
tion of, 232; against deposit of 
bonds, etc., unsound, 239; not nec- 
essarily affected by unbalanced 
budgets, 239 ; government issues of 
currency a trust function, 240; 
systems of America and Europe 
compared, 240; the power of Con- 
gress to issue, 256. 

Currency and bank credit system, a 
sound system, 208; arbitrary sys- 
tem not stable, 211; a better one 
possible, 222; unsafe under pri- 
vate initiative, 223; difficulty of 
displacing previous system, 224; 
adjustment of a new sysytem to 
present standard of value, 225; 
will not affect prices, 231 ; un- 
soundness of indicated by booms 
and depressions, 235; responsible 
for post-war troubles, 236; should 
be kept distinct from public debt, 
257 ; most hopeful method for re- 
habilitation of European currency 
systems, 257; proposed interna- 
tional currency system, 258; inter- 
national, 259. 

Currency and bank credit, defined, 
201; things that cannot be used as 
a basis of, 236; effect of its issue 
upon prices, 237; a trust obliga- 
tion, 237; sound, 238; power of 
government to issue, 256. 

Debt, public or private, not a proper 
basis for a currency or bank credit 
issue, 237. 

Debtor and creditor robbed by fluctu- 
ating standard, 203. 

Decadence, signs of, 51. 

Democracy, underlying principles of, 
28; antagonism between special 
privilege and democracy, 111; in- 
dustrial, 123; a growth, 124; pre- 
paration for diffusion of, 123; 
class interests tend toward, 145; 
learning by divisions, 145; con- 
trasted with autocracy, 162; is 



Index 



269 



democracy possible? 197; gives 
freedom of action, 197. 

Democratic equality between em- 
ployer and employee promoted by 
intelligence, 122. 

Dependent classes, duty to, 56. 

Development should be adapted to 
needs of the locality, 246. 

Distribution, communistic and social- 
istic contrasted, 10; justice the 
basis of, 11; economy superinduced 
by just distribution, 71; the ideal, 
86; more just, 164. 

Dollar, 200; the present established 
standard of value, 225. 

Economics, founded upon ethics, 21. 

Economic development, three stages 
of, 146. 

Economic evolution, 138. 

Economic law, the true price regu- 
lator, 231. 

Economic organization now auto- 
cratic, 121. 

Economic power greater than state 
power, 249. 

Education, by the State, 9; the rem- 
edy, 120; most widespread to-day, 
121 ; hope in, 151 ; in rural dis- 
tricts, 245 ; need for better, 264. 

Employer, and employee problem, 
116, 123; and employee affected 
alike, 94; not responsible for sys- 
tem, 118; effort to prevent organi- 
zation of workers fruitless, 118; 
opposition to rise of employee, 122. 

Equality of opportunity, the safe 
foundation, 163. 

Evolution, 54, 138, 142; forced for- 
ward by invention, 185 ; cannot be 
stopped by reaction, 185. 

Exchange, advantage in, 67. 

Exchange system, faulty operation a 
cause of rise and fall of business 
activity, 221. 

Experience, the teacher, 151. 

Exploiters few, exploited many, 98. 

Exploitation, not cured by enlarge- 
ment of exploiting class, 95. 

Farmers, and common labor, 132; 
least social-minded, 132; coopera- 
tive psychology developing among, 
133. 

Federal Reserve Banks, would fur- 
nish framework for better system 
of currency and bank credit, 222; 
functioning under a Central Bank, 
261. 

Federal Reserve Law, opportunity for 
changing the price level increased 
by, 226; credit system made a pri- 
vate monopoly by, 227 ; has power 
to create arbitrary credit based on 
private debt, 227. 



Federal Reserve System, 216; rapid 
inflation under, 226. 

Fiat credit instruments affect prices, 
210. 

Financial savings under government 
ownership of railroads, 251. 

Fluctuation in business activity 
caused by faulty operation of ex- 
change system, 221. 

Force, mind and physical contrasted, 
46. 

Freedom of individual action, 157. 

Freedom of initiative, 163. 

Gold, not a proper element of credit 
exchange, 200; cannot be a stand- 
ard of value, 212; shipment should 
not affect credit exchange, 213; as 
a basis of currency, a source of 
evil, 213; gold reserves not useful, 
220; gold production excessive, an 
economic waste, 220; danger of ac- 
cumulation, 220; not needed in a 
representative currency system, 
221; gold and silver coinage should 
be discontinued, 228 ; proceeds of 
sale of should be applied to pay- 
ment of bonds, 228. 

Gold basis, immoral, 214; objections 
to, 216. 

Gold certificates, warehouse receipts, 
225; should be redeemed in "Treas- 
ury notes" or coin, 228. 

Gold standard system should be dis- 
carded, 260; gold standard system 
and Great Britain, 261. 

Government, by the few, 149; result 
of government regulation, 149; cer- 
tification of weight and fineness, 
199; ownership of Central Banking 
system, 223, 227 ; currency a debt, 
238; issues of currency a trust 
function, 240; increase of function, 
250; ownership of railroads would 
put rates on a mileage basis, 254; 
cannot make something out of 
nothing, 257. 

Great Britain and the gold standard 
system, 261. 

Guild principle, 102. 

Health work and schools, 249. 

Hepburn rate bill, 248. 

Individual, the final judge, 153; im- 
portance of, 161; problem to in- 
crease capacity of, 265. 

Individual initiative, important, 
121; liberty, 154; freedom of, 153. 

Individual worth, increasing appre- 
ciation of, 159, 162. 

Individual responsibility increased, 
161. 

Individualism, defined, 8; limited, 
12; valuable, 12; necessary for 



270 



Index 



existence of individual initiative, 
23. 

Industrial change, becoming a world 
problem, 131. 

Industrial democracy slow, 123. 

Industrial organization, 141. 

Inflation and deflation, America suf- 
fering from, 214; prevention of, 
222; gradual increase of, 226; ra- 
pid inflation under Federal Re- 
serve system, 226; retention of in- 
flation for stabilization, 232; ex- 
tent of, 233; prevented by setting 
up reserves, 233 ; probable bank in- 
flation, 234. 

Initiative, freedom of, 153. 

Injustice, provocative of discord, 
126; between employer and em- 
ployee, 115. 

Institutions, eleemosynary, 10; born, 
not made, 244. 

Insurance, charge justified, 68; abuse 
of insurance fund, 71; insurance 
fund under capitalism represented 
by net earnings, 91. 

Interest, 61, 66, 69; regulated in Cen- 
tral Banking system, 223, 230. 

International currency system pro- 
posed, 258; international business 
could be done under a single stand- 
ard, 259; international currency 
and bank credit, 259; international 
prices, 260. 

Interstate Commerce Commission, 
248, 249. 

Invention of machinery cause of im- 
provement, 62; forces evolution 
forward, 214. 

Inventive faculty dwarfed, 121; 
cause of social improvement, 140. 

Israelites, 74. 

Justice, the safe way, 127. 

Labor, defined, 21; law of, 25; re- 
sults of property, 27 ; labor, the 
law of being, 45, 138; cooperative, 
53; want produced by non-produc- 
tive labor, 53 ; effective, 54 ; better 
adjustment of, 54; not a commod- 
ity, 116; erroneous views of labor 
organization, 119; labor coopera- 
tion not to be prevented, 118; duty 
to organize, 119; capital and, 
126; increased demands of, 131; 
farmers and common labor, 132; 
waste by duplication of, 137. 

Labor union, 129. 

Laborers, necessity for work, 47. 

LaFollette, 105. 

Laissez-faire, involves force and se- 
lection, 170. 

Land, defined, 21; common owner- 
ship of, 25; no conflict of rights in 
common ownership of, 27 ; division 



of, 28; vested rights in, 29; abuse 
of the common right in, 30; law of 
eminent domain, 33 ; speculation in, 
33; damages under eminent do- 
main, 34; development retarded by 
owners, 34; public's right inalien- 
able, 35; individual's right to land 
in use, 37; effects of private owner- 
ship of, 38; effect of land value, 
39 ; effects of common right in, 41 ; 
feudal tenure, 42. 

Law, of collective effort, 56; of being, 
56; futile in arresting economic 
progress, 147 ; against evolution 
not effective, 242. 

Laws, for social expression, 244; 
should be adapted to present sit- 
uation, 244. 

Leadership essential, 145. 

Liberty, loss of, self-inflicted, 153; 
defined, 154; term misunderstood, 
155; consists in right to obey 
moral law, 155. 

Liquidation of currency, 226. 

Malum in se, 241; prohibitum, 241. 

Majority action, not valid against 
moral law, 125. 

Man, gregarious, 13 ; his acts a series 
of approximations, 22; land his 
heritage, 25; born free and equal, 
26; creation of, 28; greed of, 40; 
made up of mental and physical 
powers, 46; imperative duty of, 
47; complexity of, 48; differentiat- 
ed from the beast, 52; duty to 
eliminate ineffective labor, 53; 
worship of the material, 73; learns 
from mistakes, 136; a social being, 
156; desire to excel, 159. 

Manufacture, 63; primitive methods 
of, 138; manufacture and com- 
merce concentrated by transporta- 
tion policy of the railroads, 254. 

Marketing system of the country 
would be affected by equal oppor- 
tunity in transportation, 254. 

Merchant Marine, 177; policy, be- 
trayal of a public trust, 188. 

Mexico, 178. 

Monopoly, 16; march toward, 141, 
144; private, 151; private monop- 
oly serves a purpose, 151; private 
monopoly only a stage in human 
progress, 151 ; of force or selec- 
tion, 168; the ideal, 169; two 
classes of, 169; germ of, in all 
business, 172; the public's choice 
of form, 172; public and private 
contrasted, 172; public monopoly's 
broader base for capitalization, 
173; public superior to private 
monopoly, 173; principles of pub- 
lic and private monopoly different, 



Index 



271 



173; private monopoly must first 
serve itself, 174; private monopoly 
must exploit, 174; contest between 
public and private, 175; private 
lacks moral foundation, 175; pri- 
vate monopoly by nature an ex- 
ploiter, 176; gravitates toward cor- 
ruption, 176; private monopoly 
seeking to conquer, 177; private 
monopoly has power of taxation 
without representation, 177; in- 
herent weaknesses of private mon- 
opoly, 178; economic advantages 
of public monopoly, 179; public 
monopoly and private accumula- 
tion, 180; public monopoly the 
highest economic development, 
181; public monopoly opposed for 
fear of its success, 184. 
Morons, mass of, 265. 
Napoleon, individual prowess recog- 
nized by, 162. 
Nationalization, fields for, 251 ; of 

railroads reactionary, 255. 
Net earnings, 91. 
North Dakota, 178. 
Notes, 61. 

Organization, a necessity, 9 ; social- 
ism, communism, and individual- 
ism essential parts of human or- 
ganization, 12; society an, 13; 
purpose of workers', 118; erron- 
eous views of, 119; prompted by 
self interest, 140; requisites of, 
140, 142; effects of upon the indi- 
vidual, 152. 
Over-specialization, 164. 
Papee currency to be issued only 
against the surrender of corre- 
sponding amounts of bank credit, 
222. 
Parcel post, opposed, 189; the zone 

system, 190. 
Partnership, first method for provid- 
ing increased capital, 60; general, 
61; special, 61. 
Patent, possession gives monopoly 
power to impose its will upon 
those dependent upon it for serv- 
ice, 168. 
Pauperism. 53. 

Payment of bonds made by liquida- 
tion of gold and debts due against 
Federal Reserve notes, 228. 
Plebeian class, 132. 
Post-office department, 192; best ex- 
ample of application of service 
principle, 193. 
Postal system, Thomas Jefferson's 
distrust of, 193; its history its 
best witness, 194; not a cause of 
corruption, 195. 



Poverty, its cause, 137. 

Press, power of business over, 103; 
influence of advertisers over, 104; 
editorial policy influenced, 104; 
railroad influence over, 105. 

Prices, price changes, 231 ; regulated 
by economic law, 231; internation- 
al, 260. 

Principles, suggested application of, 
241 ; sound principles should not 
be legislated against, 242. 

Private initiative, unsafe to leave 
currency and control of bank cred- 
its under, 223. 

Private ownership of coal and trans- 
portation invites revolution, 263. 

Profit, divests worker of title, 88; 
a tribute, 88; profit first, service 
second, 93. 

Profit sharing not a remedy, 96. 

Progress, dependent upon, 137; of 
civilization by empirical effort, 
184. 

Public, against interruption of serv- 
ice, 110; change of opinion, 148; 
public service includes all social 
acts, 168; administration attacked, 
182; growth of sentiment for pub- 
lic ownership, 186; lack of initia- 
tive of, 197 ; ownership and opera- 
tion of public service institutions, 
246; public ownership and private 
interests should make no entan- 
gling alliances, 254. 

Railway system, example of monop- 
olistic ingratitude, 177. 

Railroads, change of view in regard 
to states' rights, 248; field for na- 
tionalization, 251; one system of, 
251; tale of woe, 253; manufac- 
ture and commerce concentrated by 
transportation policy of, 254; na- 
tionalization of, reactionary, 255. 

Rate, of hire, 60; effect of high in- 
terest rate, 66; of interest, measure 
of progress, 79; rates would be put 
on mileage basis in government 
ownership of railways, 254. 

Redemption of currency, 232. 

Regulation, impossible, 97, 146, 148; 
public relies upon, 148; effect of, 
170; of interest rates in Central 
Banking system, 224, 230; of 
credit operations in proposed Cen- 
tral Banking system dependent 
upon principles rather than human 
discretion, 231. 

Representative credit exchange, 205; 
system subject to dangerous man- 
ipulation, 214. 
Representative currency system needs 
no gold, 221. 



272 



Index 



Reserves, to prevent inflation, 233 ; 
against "Credit notes," 234. 

Rural districts, best field for coopera- 
tion in, 245. 

Russia, 178. 

Saving, reasons for, 77 ; promoted by, 
78; an instinct, 80; increased by 
intelligence, 80. 

Schoolhouse should be center of rural 
cooperative activities, 245. 

School system should be democratic, 
245. 

Schools and health work, 249. 

Service principle in cities, 246. 

Sherman anti-trust act, 241. 

Shylock, 79. 

Slavery, causes of, 154; self-inflicted, 
153. 

Socialism, defined, 8; promoted by 
captains of industry, 171; public 
or private? 191; public and private 
contrasted, 194; private socialism 
a direct cause of socialism, 195; 
political power not developed by 
public socialism, 196. 

Socialistic cooperation, 10; rule of 
distribution, 117; activities, 191; 
socialistic enterprise has only lim- 
ited opportunity in separate states, 
247. 

Social service under private initia- 
tive a privilege, 169. 

Social development, local, state, na- 
tional, and international, 245. 

Society, three classes of, 86; stand- 
ard raised, 121; usually against 
progress, 170; lack of prevision of, 
264. 

Special privilege, a grant from the 
sovereign, 167; free government 
destroyed by triumph of, 169; 
short sighted, 171; desire to per- 
petuate its power supreme, 178; 
reverted to after removal of pres- 
sure, 181; states' effort to limit 
exploitation may be defeated by, 
247. 

Stabilization, of values the end de- 
sired, 229; the reason for retaining 
inflation, 232. 

Standard of value, in system of cred- 
it exchange, 202; single standard 
necessary, 203 ; must be invariable, 
203; diverse standards immoral, 
203; must be intangible and in- 
variable, 203; not flexible, 205; 
changed by arbitrary alteration in 
volume of currency, 208 ; the pro- 
per, 211; cannot be a material sub- 
stance, 215; present, 224; debtor 
or creditor robbed by change of, 



225; changed by arbitrary increase 
or decrease of credit, 235. 

States' rights, and capitalism, 248; 
railroads' change of view in regard 
to, 248. 

State opportunity restricted, 186. 

Stock, interest, 61. 

Tariff, 141. 

Taxation, proper use of, 43. 

Telegraph and Telephone system, 
fields for nationalization, 251; 
should be part of postal service, 
261. 

Transportation, capitalistic control 
of, 96; primitive, 138; banking 
control no longer needed in, 253; 
effects of equal opportunity in, 
254; revolution incited by private 
ownership of, 263. 

Trusts, 146; would be regulated by a 
system of equal opportunity in 
transportation, 254. 

Trustee, obligation to ward, 70; Car- 
negie on, 76; government a trustee 
for the public, 239. 

Trust relation, 70; betrayal of, 188. 

United States, dumping ground for 
gold, 220. 

United States' government should 
own Central Banking system, 223. 

Utility, demands of, 48; works of, 
49; disregard of the demands of, 
50. 

Value, circulatory and commodity 
values, 201; an abstract idea, 202; 
is variable, 204; of unit changed 
by arbitrary issues, 210. 

Wages, 62, 117; effect of cooperation 
on, 122. 

Waste, 262. 

Wards, of Communism, 47. 

Wealth, by accretion, 108; increase 
not necessarily due to profit sys- 
tem, 179. 

Whittington, Dick, 72. 

Work, measure of, 47; exhaustive 
work not economical, 128. 

Worker, defined, 21; common respon- 
sibilities of, 56; working destruc- 
tively, 109; cooperation of, 113, 
116; right to organize, 118; coop- 
eration of workers makes for effi- 
ciency, 123; gives trouble during 
prosperity, 126; raised standard of 
living, 129; driven to organize, 
146; better treatment of and 
greater opportunities, 158; should 
have freedom of choice of task, 
165. 

World, need of mental and physical 
energy in, 46. 



